> By using Bitcoin, like using your bank's website, you still need an Internet connection to use your currency digitally.
You can do all sorts of things with Bitcoin without needing to be attached to a network. You can have an address that has value associated with it and then print a private key as physical Bitcoin -- variants that have been done include coins, bills, paper wallets, and OCR-able backups of regular wallets. In a high security situation you can have Bitcoin running on an offline computer and sneakernet signed transactions from it to avoid ever exposing it to the Internet.
> However, it's possible to create a digital currency that doesn't have to be plugged-in to a network to operate.
Yes, like all of the above.
> Being able to send an e-mail with a cash value integrated in its data is something that hasn't been done long ago, or even yet today.
You lost me. How does email work without being attached to a network?! If you're giving us access to a network, why not just use Bitcoin? If you meant something like snail mail, well then, again, see above.
> Even better, some digital currencies could (conceptually) be sent in a paper letter as cash.
Yes. Like Bitcoin.
Or are you truly trying to propose some kind of digital currency that never requires network access? How could that possibly work? If network access isn't allowed, how do I know that you haven't already sent the same "digital coin" that you're sending me to ten other people? The double spend problem is real. Bitcoin solves it. I don't see how a solution is possible that doesn't involve some kind of communication.
Digital implies something that is based in information, which doesn't imply a computer network. I won't pretend to be an expert, and I might have been living under a rock concerning Bitcoin, as it is not something I use.
The article link I posted (for a research paper, second level post), plus the original sources and works that cite it specifically discuss digital or cryptographic cash which follow six properties, including anonymity and some measures of usefulness.
Bitcoin achieves this, but it's also possible to achieve with a central authority or coalition of authorities. Interestingly, the consequence of double payment or false payments is to have one's identity revealed or to effectively assume debt. The fraudulent charges are exposed as IOUs.
The proof of work portion of Bitcoin, which I think is bothersome and wasteful, is related to the money supply. If a currency were tied to real funds or precious metals some of the burden would be lifted, but a large database would still be required.
Using a blockchain to implement a trustless distributed ledger is such a fundamentally important revolution in digital currencies that you can compare it to what Einstein's theory of relativity did for physics. They both caused complete sea changes in their fields. Citing a paper from the early 1990s on digital currency is like citing a paper on physics from the 1800s in a technical discussion about GPS.
I am not being hyperbolic. I realize what it may sound like, but solving the double-spend problem without a central authority was the tricky issue in digital currencies that vexed computer scientists for decades. Bitcoin solved it. The double spend problem falls under the category of (b) from the paper that you cited, and note that said paper does not solve it.
If you are at all interested in digital currencies, and it sounds like you definitely are, then you owe it to yourself to read up on Bitcoin, to understand how it works, and to understand the problems that it solves. There has been a huge explosion in the field since the release of Satoshi Nakamoto's original whitepaper.
To answer some minor points:
> Bitcoin achieves this, but it's also possible to achieve with a central authority or coalition of authorities.
This has been possible for thousands of years. You just have a central ledger that is locked up and inaccessible somewhere. That's how all existing banking systems work. I'm not sure why you keep bringing this up; it's not relevant because it doesn't solve the problem that Bitcoin does. Saying that it can be done with a central authority is like telling Gugliemo Marconi that he can make contact with the other receiver if he just lays a wire between the two. Yes, it's true, but it misses the point entirely; he was trying to invent wireless communication, not create yet another telegraph system (which had already been around for decades).
> Interestingly, the consequence of double payment or false payments is to have one's identity revealed or to effectively assume debt.
Bitcoin allows strong pseudonymity while maintaining protection against double spends, while subsequent iterations of it building on the blockchain idea allow for strong anonymity (see Darksend).
> The proof of work portion of Bitcoin, which I think is bothersome and wasteful, is related to the money supply.
The proof of work portion is required to implement a system that has the properties that Bitcoin has. Relativity is tricky and hurts my brain, but if I want to make a GPS satellite that works, I have to use it.
> Citing a paper from the early 1990s on digital currency is like citing a paper on physics from the 1800s in a technical discussion about GPS.
Like Maxwell's equations?
Anyway, for (b) security it claims to be secure by providing a way for the bank A to reveal the identity P of the double-spender mathematically from the duplicate spent coins.
I agree that these ideas solve different issues.
Bitcoin is set up for making payments to individuals far away and anonymously (or pseudo anonymously). This makes it possible to say, order a pizza with Bitcoin. By the time the pizza is done being made it's possible for the merchant to verify the transaction. Completing a transaction on the sneakernet would be akin to carbon-copying a credit card when the network is down.
These other digital currency ideas are different and seem easier to implement for making a purchase at 7 Eleven and leaving within 10 seconds or making purchases without a network and knowing that the value is there.
Yes, it requires banks, like checkbooks require banks, but a digital currency can offer some benefits that paper checks don't, and it shows that Bitcoin has limitations. The drawback would be negotiating an agreement with a financial institution.
In terms of the article, Bitcoin makes it very easy to lose money, especially if someone loses their private key.
Maxwell's equations don't yield workable GPS. You need general relativity. Similarly, you need a blockchain (or some similar solution for the double-spend problem) for a workable digital currency.
> Anyway, for (b) security it claims to be secure by providing a way for the bank A to reveal the identity P of the double-spender mathematically from the duplicate spent coins.
Yes, exactly, it needs a centralized authority (the bank). You're citing a digital currency scheme that was never workable enough to be implemented and that was state of the art 25 years ago, which is an eternity in the world of digital currencies. Can we please talk about what's state of the art today?
> These other digital currency ideas are different and seem easier to implement for making a purchase at 7 Eleven and leaving within 10 seconds or making purchases without a network and knowing that the value is there.
... umm, like a credit card? That solves your use case of being able to pay for it quickly. It's also been around for decades. Or for something that works when the network is down, how about a simple smart card, like that can be used to pay for bus rides? Again, decades-old technology. Not revolutionary now. Still requires a centralized authority. You're talking about long-solved problems.
If you want to do it with no central authority, which is the key thing, then now we need to use blockchain technology. If you're willing to accept the low risk inherent in 0-conf transactions, you can use Bitcoin for your theoretical "buy something cheap at 7-11 in 10 seconds" use case. If you want to reduce risk further, you can use Lightning Network or similar, which is a further evolution on Bitcoin that does allow ironclad sub-second confirmations. I highly suggest that you look into it. It sounds like what you are most interested in.
I don't know how else to make this important fact clear to you: If you have a centralized authority, then there's nothing new under the Sun, and it's all possible with decades-old technology. It's not really a digital currency though, it's just a method for moving entries around in a centralized digital ledger. It requires trust in banks and governments. Decentralized digital currencies like Bitcoin require only trust in math. This is a huge difference in kind, not degree, but you keep suggesting schemes that don't even have this important property. I get that you don't think it's important, but at least maybe try to understand it?
Well, whether or not you agree, there is some newness.
The Okamoto-Ohta scheme might seem like handing out gift card codes to people as payment to you, but there are interesting mathematical properties to it that move responsibility further up the ladder than simply saying you're SOL if you've been handed a spent card number.
If you hold BTC you might not want to hear that Bitcoin has faults, but it does.
Outside of practical problems, it's labeled as a cryptocurrency but the design of it, besides wallet keys, uses little cryptography. The scheme of signing cash values to anonymize spenders' identities unless counterfeiting occurs involves much more cryptographic math. If you try to research this field on Wikipedia for instance, only 'decentralized' cryptocurrencies are explained in the cryptocurrencies article, which involve little cryptographic math. Even if you think what I'm describing is ancient history, it is not well known to everyone.
Proof of work itself is not very much based in cryptography, even if it's implemented with hash functions, so the real breakthrough (on the crypto side) is signing accounts with public/private keys which isn't revolutionary to anyone who has used RSA before.
Bitcoin is revolutionary like bittorrent is, and in this case I'm not interested in the P2P implementation. I do understand its value to users of Bitcoin, however. But in some ways, beyond its implementation which is quite complicated, the block chain itself is completely centralized, while the miners are decentralized.
A scheme with issuing banks might be centralized but I'd rather call it ad hoc.
Credit cards and smart cards place trust in a different position than electronic cash. It provides identity information to the merchant, and can allow the merchant to set the price of the transaction. It's also possible to reverse charges or overdraw accounts. The case of double-spending in the Ot-Oh is an instance of fraud and the perpetrator is then identified. This is a completely unique mathematical argument, and yes it is new, if it hasn't been implemented in the 25 years since it was discovered.
The two sides of this argument are what is more important: the mathematical basis or the software implementation.
It also might be the case that what you are entertaining is the discussion of a currency and what I want to discuss is the implementation of a digital form of exchange.
So, if Bitcoin Bank A issues Bank A digital cash, backed by Bitcoin, then merchants or friends that accept bank A's digital cash can make offline transactions with digital currency in the way explained above with specific programs or devices. Starting accounts would require more than using Bitcoin, ie. providing identifying information like SSN, but the commonplace use of the digital cash would be secure and convenient while being arguably more reliable/convenient than either cash or credit cards and faster than accepting Bitcoin transactions directly.
It might be hard to see because of how many uphill battles Bitcoin has had to fight, now that some sellers are willing to accept it, but there are many details to the hand-to-hand transactions that aren't convenient, like messing up fees or needing to wait for blocks to be accepted. Waiting 10 minutes for a charge to pass before getting something out of a vending machine, for example, or having your card information stolen by a faulty vending machine card reader for your run-of-the-mill credit card.
The truth is both BTC and other digital cash forms have the same problem - there are no chargebacks. So if you purchase something at a distance with either, there's no way for a refund if someone runs off with your money.
So to summarize - yes, there are trade-offs between any implementation and there are differences between currencies and forms of currency, which are not totally exclusive, and I'm still learning about Bitcoin, so thanks for the information.
> but there are interesting mathematical properties to it that move responsibility further up the ladder
That's the thing, with decentralized digital currencies, there is no "further up the ladder", nor can there be, so this property isn't appreciated. And decentralized digital currencies are the only ones that are finding any traction.
> Outside of practical problems, it's labeled as a cryptocurrency but the design of it, besides wallet keys, uses little cryptography.
You should read up on the latest developments. Bitcoin is essentially a platform now that has hundreds of different technical innovations (most of them involving cryptography, which you seem fond of) built either on top of or with modifications to. Everything from segwit to Lightning Network to n-of-m escrow transactions to Darksend to sidechains to blind transactions to Ethereum to Namecoin etc. etc. etc. You could spend months reading up on all of this. It's all made possible thanks to Bitcoin. Also, did you know that Bitcoin has a built-in scripting language (from the very beginning) that allows all sorts of nifty transactions that are way more complicated than "Send N BTC from A to B"? You should look into it.
> the block chain itself is completely centralized, while the miners are decentralized.
Huh? Every full node has its own copy of the blockchain. It's way more decentralized than mining, which is limited to a smallish number of pools. That everyone has the same copy of Bitcoin just means that everyone is living in the same objective reality; it has to be the same, otherwise you could never agree on anything. Absent a currency that has intrinsic value such as gold (and there are big problems inherent in that too), and which is impossible for virtual currencies, the value comes from everyone agreeing on where the value is.
> Waiting 10 minutes for a charge to pass before getting something out of a vending machine
Well realistically a vending machine would just do a 0-conf transaction, because pulling off a double spend would be way more effort than it's worth just to steal a soda. But also, you do realize that ten minutes is just a tuning parameter, right? There's no fundamental reason it has to be that value. There are altcoins with faster blocks, and Lightning Network does side-chain transactions that confirm near instantly. It's not an intractable problem, in other words; you just tune some parameters or use something built on top of Bitcoin. People are much more willing to use modifications on top of Bitcoin to solve these problems than they are to give up on the decentralized nature of it entirely and just go with something else. It's no accident that decentralization is the killer feature, and anything lacking it is a non-starter.
There are plenty of centralized financial payment services that are good enough. That ideas in that article you linked to never caught on because they don't add value of the kind that people care about. It's no accident that it was never actually implemented. Bitcoin, meanwhile, just did that one thing, decentralization, but because of that it has been used by millions of people worldwide, and is sitting at a total market cap right now of ~$7 billion. You can't really argue with results. You can keep arguing until you're blue in the face that decentralization doesn't really matter, that all these other things are actually more important, but that's not borne out by results.
> or having your card information stolen by a faulty vending machine card reader for your run-of-the-mill credit card.
This is an unrelated issue related to push vs pull transactions (push is better). Credit cards are pull transactions. Bitcoin is push. Chip and PIN as implemented by credit cards in most of the rest of the world are also push transactions, and also handily solve the problem.
> The truth is both BTC and other digital cash forms have the same problem - there are no chargebacks. So if you purchase something at a distance with either, there's no way for a refund if someone runs off with your money.
Yes, sending Bitcoin using a raw transaction is like sending cash or a money order. No argument there. People are used to those risks however. Also, using the aforementioned Bitcoin Script language, you can write multisig escrow transactions that do allow what are effectively chargebacks. I suggest you look into it. You are arguing many things as being faults of Bitcoin and the related ecosystem which do in fact have solutions.
I've been fairly heavily involved in Bitcoin for about five years now and this is just scratching the surface. I do recommend learning more -- most of your concerns are already addressed in ways that do not compromise decentralization.
It's not centralized though. Each node is independently building and verifying the entire record, based on no criteria other than (a) prefer the longest chain and (b) use blocks you get over the P2P network from other nodes. You are using the word "centralized" incorrectly, or at the very least, in a way that is inconsistent with the way that everyone else in the space uses it. A semantic argument over a word doesn't change the way that things work.
The only centralized thing about Bitcoin is that the logic (i.e. the software rules) that all nodes are using is the same. If this weren't true then there could be no consensus blockchain. But there's a huge difference between thousands of different actors, all who merely happen to be running the same software that determines things by consensus, and then a single authoritative actor who controls everything by fiat.
You can do all sorts of things with Bitcoin without needing to be attached to a network. You can have an address that has value associated with it and then print a private key as physical Bitcoin -- variants that have been done include coins, bills, paper wallets, and OCR-able backups of regular wallets. In a high security situation you can have Bitcoin running on an offline computer and sneakernet signed transactions from it to avoid ever exposing it to the Internet.
> However, it's possible to create a digital currency that doesn't have to be plugged-in to a network to operate.
Yes, like all of the above.
> Being able to send an e-mail with a cash value integrated in its data is something that hasn't been done long ago, or even yet today.
You lost me. How does email work without being attached to a network?! If you're giving us access to a network, why not just use Bitcoin? If you meant something like snail mail, well then, again, see above.
> Even better, some digital currencies could (conceptually) be sent in a paper letter as cash.
Yes. Like Bitcoin.
Or are you truly trying to propose some kind of digital currency that never requires network access? How could that possibly work? If network access isn't allowed, how do I know that you haven't already sent the same "digital coin" that you're sending me to ten other people? The double spend problem is real. Bitcoin solves it. I don't see how a solution is possible that doesn't involve some kind of communication.