Bitcoin vs PayPal

2019-08-01T12:58:03.000Z Honest Cash

1. What is Bitcoin?

Bitcoin is a decentralized company (d.a.o., decantralized autonomous organization) - coowned by employees (miners) and users (bitcoin holders, a.k.a. hodlers). Decentralized means that anyone can become miner or hodler without needing a permission from prior owners. The product of this company is a transaction service (similar to PayPal). Units of value transacted on this service are also called bitcoins.

2. How do you make money working for the bitcoin company?

There are two options. First, you can buy shares of the company (bitcoins) and work to make the company more successful. Then the value of your shares go up. Second, you become a miner and get paid directly in BTC for your services by the network users.

3. Are bitcoins commodity?

No. With commodities if the company that produces it (lets say gold mine) goes down, the commodity (gold) still has value. With shares (bitcoins), if the company (bitcoin network) shuts down permanently, the shares (bitcoins) have zero value.

4. Are bitcoins currency?

Yes. The more widely they are accepted in trade the more successful currency it is.

5. How can they be shares and currency at the same time?

Because it is very hard to make such monetary use illegal for the bitcoin shares (see point 1 - decentralization). Bitcoin owners also decided to emit bitcoins in such a way that should stabilize their value over time. This is not true for traditional company shares. A successful currency needs to have stable value.

6. What is the blockchain technology that bitcoin is based on?

There is no such thing. The difference between bitcoin and paypal is that bitcoin is coowned by employees (miners) and users (bitcoin holders). Bitcoin is based on the "bitcoin system", which makes this decentralized ownership possible. (see point 9)

7. Why is everyone saying that there is a blockchain technology then?

The misunderstanding started when the early adopters (programmers) were (very badly) explaining how bitocoin works to people working in traditional banking/finance. Blockchain is just a name for the file where the transactions are saved.

8. I have heard that bitcoin is backed by pure mathematics, is that true?

No, currencies backed by pure mathematics do not work (see point 9). Bitcoin is backed by human greed.

9. So what is it that Satoshi Nakamoto invented?

There were many attempts by tech people to create such a thing as bitcoin before. They were trying to accomplish this purely by means of science and technology - mathematics, cryptography, computer algorithms. All the attempts failed at a crucial step - getting all the computers in the network to agree. Satoshi realized that it does not matter that we dont know how to do this step technologically. We can replace it by trust that humans are greedy. They wont break the system, if they own (profit from) it. In fact, they would try to improve it. (Which is nothing new btw - it is the same premise as what capitalism is based on.) We need this company to be owned by as many people as possible (see point 1) so we can rely on what the average human is like. (Because if it was operated only by a handful of people they might go crazy at the same time and burn their datacenters at the same time.) This is not a technological invention, but a social one. Sometimes we call it the "Nakamoto consensus mechanism".

10. Bitcoin is complicated, only tech people understand it, so i have to trust their opinion, right?

No, thats what the failed (see point 9) tech people say. Bitcoin is not a technology, but a system. If you can understand such things as human action, greed or capitalism, you can understand bitcoin.

11. What should be bitcoin's governance model?

Bitcoins governance model ("The Nakamoto consensus") is the same as in any other company in capitalism. The owners (hodlers + miners) decide what they do based on what they think their customers (tx senders + hodlers) want. This governance model can only be changed by physical violence.

12. Do the current technical parameters of bitcoin define what bitcoin is?

No. What the technical parameters of any product (made by any company) are now, does not define forever what the product is. This changes over time based on what the owners of the company want the product to be.

12a. Does that mean that the 21 million coins limit can be changed?

Yes, if majority of the owners (hodlers + miners) want it.

12b. Do the miners use the governance model (nakamoto consensus) only to agree on the order of the transactions in blocks?

No. They use it to define what the product of the bitcoin company is. Same as any other owners in any other company in capitalism.

13. Did Bitcoin Cash give more power to the miners?

No. Miners together with hodlers have all the power by design of bitcoin from the start.

14. Can the bitcoin company offer more competing products, or competing departments?

Sure, BTC and BCH are such competing products, offered by the same bitcoin company.

15. Does bitcoin need 100% unanimous total consensus of the whole bitcoin economy to change?

No. As with any other company the majority of the owners (hodlers + miners) is sufficient. The more owners agree, the better.

16. I have heard there are other currencies like bitcoin. Can any of them have better value than bitcoin?

No. Bitcoin is a system. It either adapts the product of the system (see point 12), or it does not work. If it does not work, then all these other currencies also do not work, because they are all based on the same system. Furthermore, since bitcoin is more valuable, the more people use it (so called network effect), this creates a winner-takes-all situation (see Facebook).

17. Why is bitcoin better than national currencies?

Because national currencies rely on humans being good, which always fails and humans get corrupt. Bitcoin relies on humans being greedy, which seems to work better.

18. So bitcoin does not work if humans are not greedy?

Yes, more than half of the humans (owning the bitcoin system) need to be greedy. Otherwise they would attempt to prevent usage of bitcoins for "bad" stuff such as drugs and political opponents, making it worse than national currencies.

18a. Is bitcoin a trustless system?

No. Bitcoin relies on the trust that more than half of the humans are greedy (see point 16) and sane.

18b. So bitcoin does not work if humans are insane?

Yes. If the owners catastrophically fail to adapt the product of the company, then the system does not work. That is, it is not fundamentally better than a central banking system, because it would be just a matter of time until it fails again and again. Which is precisely the problem it was attempting to solve (see point 17). It can still possibly be marginally better though.


RE: Bitcoin vs PayPal

by @Geri

I stopped using paypal months ago. PayPal was always supporting scammers, the people who used fake chargebacks. After they decided to fine the sellers for $50 after someone filled a chargeback, i decided to stop using the service alltogether, and since 2019 june, i only accept cryptocurrency payments for all of my business.

RE: Bitcoin vs PayPal

by @btcfork

Interesting article, though I would disagree with (16) on the basis that I don't believe all other cryptos can be said to be based on the same system.

Therefore I don't think Bitcoin (BTC)'s fate is necessarily tied to all others.

I do accept that there are some which are more strongly tied to it, be it by way of having very similar design or (maybe), exchange rate correlation or overlap between holders (BTC rekt then investors in others rekt).

Dynamics of a theoretical BTC collapse and its impact on other currencies are also not exactly well understood. We've seen a certain amount of decoupling in some others when BTC drops hard.

RE: RE: Bitcoin vs PayPal

by @txariv

Would you agree that the design as per the above image is shared by ethereum, litecoin, monero, dash ? (Also please note that when i say bitcoin i do not mean BTC, but the bitcoin DAO.)