There's so much wrong with this post I'm not even sure where to start. Literally almost every paragraph starts something untrue. The whole article is written from a false understanding.
If you’re going to claim Schneier is wrong on crypto stuff, you’ll want to bring a suitcase of evidence along if you want people to take your claim seriously.
If you’re going to claim Schneier is wrong on crypto stuff, you’ll want to bring a suitcase of evidence along…
How about $348 billion dollars that says he's wrong about his take on Bitcoin?
Look, I get it. I respect Schneier's knowledge on encryption but he is wrong about blockchains and about Bitcoin in particular.
But he wouldn't be the first establishment technologist/economist/politician to be wrong about Bitcoin.
As I write this, the market cap of Bitcoin is a little over $348 billion dollars [1]; there's no way it gets to this valuation if its distributed trust model didn't work.
He's making social and process arguments, not technical ones.
> How about $348 billion dollars that says he's wrong about his take on Bitcoin?
Market bubbles are a thing. For a while there everyone was convinced that small plush toys were going to help them retire. The market also convinced itself for nearly a decade that "housing prices never go down". Lots of people can be wrong for a surprisingly long time.
Market bubbles are a thing. For a while there everyone was convinced that small plush toys were going to help them retire.
Yes, bubbles are a thing, but Bitcoin appears to be something different. It's passed ever test and attack. It's now being taken seriously by mainstream financial professionals, CEOs of publicly traded companies and Wall Street.
These facts themselves can't prove that Bitcoin is not a bubble but it does mean if you buy into that line of thinking, then encryption and math have to be suspect as well, since Bitcoin's functioning relies on them.
> Also, Bitcoin has been the best performing asset of the past 10 years in which most people didn't take it seriously
You're literally describing the bubble. An asset that is worth $20k one day, and worth $6k 6 months later, is worthless to anyone except speculators, speculating on... a bubble.
You're literally describing the bubble. An asset that is worth $20k one day, and worth $6k 6 months later, is worthless to anyone except speculators, speculating on... a bubble.
This is short term thinking and a general mischaracterization.
First, we've never seen a new form of money created in realtime, so it's hard to say how it's supposed to perform.
However, nobody should expect something that will fairly soon have the same market cap as gold (about $10 trillion dollars) to not have a lot volatility as it grows. The tech darlings of today—Apple, Google, Twitter, etc. were also quite volatile as they grew.
There's a lot of ups and downs for Apple as it went from darling startup to nearly going out of business in the mid-90's to a $2 trillion dollar market cap today.
As you may know, the mantra in the bitcoin community is to HODL—hold on for dear life, not to time the market. For long term investors, the ups and downs don't matter.
> First, we've never seen a new form of money created in realtime, so it's hard to say how it's supposed to perform.
This hasn't changed with Bitcoin. BTC is money like a gold bar, beanie baby, or block of IPv4 addresses is money.
> However, nobody should expect something that will fairly soon have the same market cap as gold (about $10 trillion dollars) to not have a lot volatility as it grows. The tech darlings of today—Apple, Google, Twitter, etc. were also quite volatile as they grew.
Nobody describes the tech darlings as money, or as an alternative form of currency. They're equities you can invest in, and comes with the expected volatility.
> As you may know, the mantra in the bitcoin community is to HODL—hold on for dear life, not to time the market. For long term investors, the ups and downs don't matter.
It's nice that there's a backcronym that's been created from a typo. I still don't invest in money, I use money to invest in assets.
> First, we've never seen a new form of money created in realtime.
Call me when I can buy my latte and groceries with bitcoin, or pay my mortgage. Until then you've made an investment vehicle, not money.
> The tech darlings of today—Apple, Google, Twitter, etc. were also quite volatile as they grew.
Survivorship bias. Pointing to a handful of random successful companies and trying to draw conclusions is literally meaningless.
> As you may know, the mantra in the bitcoin community is to HODL—hold on for dear life, not to time the market. For long term investors, the ups and downs don't matter.
Yeah, this isn't something you actually say about money. Honestly, it would be a kind of cultish thing to say about an investment too. I don't need a mantra for how I invest in my 401k, why does Bitcoin need one?
> A publicly traded company that puts its treasury of $425 million into Bitcoin isn't speculating
That's the literal definition of speculation, a risky one at that.
Schneier is good at times, but he doesn't always do as much due diligence as he should, and he never bothers to interact with his comment threads, answer questions, or publish retractions.
As a result, I've had more than one experience of arguing with people who take his old blog posts as gospel without ever thinking critically about them.
His article denouncing the XKCD password scheme is a gem, he doesn't bother (if it were anyone else I'd be less charitable and say doesn't know how) to calculate the entropy, and then he proposes an alternate scheme he invented that almost certainly provides less entropy and is more vulnerable to dictionary attacks.
I’m actually curious what’s wrong about it? I read it from an outsider perspective and it’s full of very convincing arguments against “blockchains.” You’re absolutely correct that he’s writing from his understanding, but Schneider’s been in the field for decades (more than many Bitcoin proponents are old), so I’m more inclined to believe he knows what he’s talking about than some other random person on the internet.
I think the main reason for the dissonance is that Schneier talks about the trust that happens (and maybe has to happen in real-world scenarios) while the bitcoin community likes to talk about the minimum amount of trust necessary.
You don't have to trust the software, you can verify it or implement your own. You don't have to trust your internet uplink, the protocol would work over carrier pigeons or with dead drops. You don't have to trust exchanges, just exchange bitcoin for local currency with your neighbor. And even if you use an exchange you shouldn't store money there anyways. The minimum required trust is tiny (basically you yourself), but of course as Schneier points out the amount of trust involved in practise isn't nearly as low, and for many people the failure cases are much worse
> You don't have to trust the software, you can verify it or implement your own.
This is a common refrain among software people, but in reality approximately 0% of the market actually rewrites such software on their own. Most people can't code, and the percentage of those who have the time, interest, and specialized programming skills to rewrite their own financial software is an incredibly tiny pool. In practice, you have to trust someone's code.
And auditing doesn't get you very far either. That takes time too, and auditing secure software is really hard. I doubt I could do it, personally.
> You don't have to trust your internet uplink, the protocol would work over carrier pigeons or with dead drops.
Be serious. Nobody does this, aside from maybe as a joke.
> You don't have to trust exchanges, just exchange bitcoin for local currency with your neighbor.
You don't have to, yet everyone seems to. Convenience matters, pretending to the contrary is a fool's game.
> And even if you use an exchange you shouldn't store money there anyways.
Crypto fans say this all the damn time, and yet nobody seems to listen. Maybe because it's foolish advice to give? While this advice is technically strong, it fundamentally fails to understand what people using any financial system want and what motivates them. Nobody wants to turn the process of moving money around into an elaborate song and dance; they want to click a few buttons and have it work. If your system counts on either telling people to avoid the most convenient option to accomplish the task, your advice will continually fail.
I just want to check to see if you read the GP all the way through to the final sentence. You're tearing it apart piece by piece as though the author was making those claims, but you neglected to quote the part of the post that revealed their true opinion.
> The minimum required trust is tiny (basically you yourself), but of course as Schneier points out the amount of trust involved in practise isn't nearly as low, and for many people the failure cases are much worse
This is pretty much how I interpret it as well, in regards to trust.
One detail Schneier misses though is:
> Honestly, cryptocurrencies are useless. They’re only used by speculators looking for quick riches, people who don’t like government-backed currencies, and criminals who want a black-market way to exchange money.
The second statement contradicts the first. People who don't like/trust government-backed currencies aren't fanatics. The way the big banks handle money is quite reckless and dangerous, as we've seen time and time again. And buying drugs for your own personal use should be legal (IMO) but is not. Cryptocurrencies are useful. Maybe not to most people, or to Bruce Schneier, but that (blanket) statement is simply false.
This just feels like moving the goalposts, though. Bitcoin has been pushed as this revolutionary thing that's going to fundamentally change currency and payments for everyday people. It hasn't. It likely won't. Maybe some other blockchain-based currency will at some point, but I'm skeptical of that claim.
Beyond that, Bitcoin as a simple store of value is an incredibly risky proposition. Someone upthread posted a link to an article claiming that Bitcoin has been the best performing asset over the last 10 years, but that ignores the gut-wrenching volatility it's gone through.
And even if you stretch to suggest that Bitcoin has been a good investment, a good investment vehicle is generally not a great currency. If I had a $100 bill that, a week later, was worth $50, I'd be pissed. If another week later it was worth $200, I'd be pleased, but would feel very uncomfortable thinking I can rely on that "currency" to continue to pay my bills over the long term.
I'm not saying Bitcoin has failed or that it's useless in general, but as a generic currency replacement I'd say it's pretty weak and unreliable, mainly only suitable for use by people at the margins, people who often can't bear the risk that Bitcoin foists upon them.
Not arguing any of that. Bitcoin is not very useful as a currency. But I trust bitcoin as a concept more than I trust USD, which is currently being devalued/inflated in favor of the stock market, solely for the gain of people who are more well off than most. I'm not a doomsday prophet nor an economist but the future of the world economy is not looking great.
Bitcoin was created as something that governments/banks/corporations couldn't control or manipulate and that's something that's worth a lot in itself, I think.
And as I mentioned Monero is quite convenient for shopping on the dark web, without government intervention.
If you trust your government, banks, politicians, and agree with all the laws and taxes, then yeah, you might truthfully state that cryptocurrencies are useless. But some believe and argue that governments shouldn't have that kind of control and people should have a higher degree of freedom and privacy.
The “false understanding” is most likely how he starts at the conclusion of “Bitcoin == bad” and works from that instead. But both types of essays are ok. The former is just an “argumentative” or “persuasive” essay, while the latter is akin to a “compare and contrast” one.
