>>However, unless censorship resis-tance in an electronic transaction is a requirement (such as for drug deals, ransom payments, money launderers, and those seeking to evade currency control), irreversibility combined with the volatile price means Bitcoin is sig-nificantly inferior to alternatives such as credit cards or PayPal
Any high charge-back industry would benefit from an irreversible payment method, which is why several offer steep discounts if one uses cryptocurrency.
With respect to volatility, that's largely a function of very thin trading volumes, and the high proportion of cryptocurrency's current value stems from speculative demand. In a hypothetical mass-adoption scenario, trading volumes will be huge, solving the first problem, and growth potential will be significantly less, making speculative value a much smaller component of the cryptocurrency's total value.
So this only applies in the early adoption phase:
>>This also means that unless the buyer is a believer in Bitcoin, the buyer ought to buy Bitcoin only immediately before they initiate the transaction, to avoid volatility (and will have had to mine or buy the Bitcoin in any case).
In a mass adoption scenario, immediately converting to fiat currencies through exchanges will not be necessary.
>>Bugs in these smart contracts can be catastrophic.
This is indeed a major risk, but one that can be mitigated through methods like formally verifiable smart contracts.
>>The exchanges themselves also cre-ate systemic risks. Almost all exchang-es seek to avoid regulation, which means they implode with almost seeming regularity—usually due to a combination of theft and fraud.
Absolutely false. The failure rate of exchanges has dramatically declined over the last several years. Methods like cold wallet storage have significantly reduced the losses suffered when an exchange is hacked, and the exchanges are now much more professionally run services than they were in 2012/2013.
I question the impartiality of the author when he makes a claim like this.
>>In many cases the bandwidth limit for crime is not the crime itself, but the money laundering.
I am dubious about this claim. Is there any case of a criminal activity being easy to get away with, but not widely committed, due to the difficulty of laundering the proceeds?
>>It is primarily criminals who regularly benefit from censorship-resistant payments
While it is true that criminals benefit the most from censorship-resistant payments, this is no different than criminals benefiting the most from privacy. It is not an argument against censorship resistance or privacy. The flip side is that exercising one's basic rights, and ensuring one's own survival by doing something as fundamental as trading a good/service for money, requires becoming a criminal in some countries, like Venezuela.
Circumventing Orwellian levels of mass-surveillance and centralized control in places like Xinjiang is also an antitode to a much more dangerous risk to society than that posed by malevolent non-state actors: https://www.hrw.org/news/2018/02/26/china-big-data-fuels-cra...
Not if your the person buying. Bitcoin guarantees 1 way movement of 'currency', it makes no guarantees on your product or service. This is why charge-backs exist.
>> With respect to volatility, that's largely a function of very thin trading volumes
That only get thinner due to limited (and loosable) deflationary currency and increasing fees due to extrodinary power consumption.
>>In a mass adoption scenario, immediately converting to fiat currencies through exchanges will not be necessary.
Not possible due to volatility and fees. See previous.
>> Absolutely false. The failure rate of exchanges has dramatically declined over the last several years.
Brick and mortar banks still get hacked, if they havent solved it, unregulated crypto exchanges certainly wont. The problem can be mitigated in traditional currency by simply 'undo'ing the damage, or holding a regulated institution responsible.
>> While it is true that criminals benefit the most from censorship-resistant payments, this is no different than criminals benefiting the most from privacy.
You've conflated privacy into this argument, which is strange because normal currencies have privacy. Crypto generally does not.
>>Not if your the person buying. Bitcoin guarantees 1 way movement of 'currency', it makes no guarantees on your product or service. This is why charge-backs exist.
In the article I linked, it explains that part of the reason high charge-back industries have a high rate of charge back is that the payment processors they're stuck with don't conduct the fraud prevention validations that more established credit card processors conduct.
So the result is that credit card scammers have an easier time conducting scams, which honest buyers end up paying for with higher prices.
While the risks posed by the merchants in these industries aren't mitigated by using irreversible cryptocurrency payments, the additional costs incurred by credit card scammers are.
Where cryptocurrency has a use is where the customer trusts a merchant in a high charge-back industry. They can enjoy high discounts for using cryptocurrency in this case.
>>That only get thinner due to limited (and loosable) deflationary currency and increasing fees due to extrodinary power consumption.
Trading volumes should have no relationship with the nominal money supply in cryptocurrency, since the units are highly divisible.
So no, in a mass adoption scenario, thin trading volumes won't get thinner. That would be totally absurd.
>>increasing fees due to extrodinary power consumption.
Power consumption follows fees, not the other way around. Power consumption is a function of mining revenues. The cost of the energy consumed approaches mining revenues. Since much of mining revenues consists of the block subsidy, as the portion of mining revenues consisting of subsidies decreases, as a result of greater fee revenue from a larger volume of transaction, power consumption per transaction decreases.
>>Brick and mortar banks still get hacked, if they havent solved it, unregulated crypto exchanges certainly wont.
Straw man. I didn't say hacks will stop. I said that exchanges are getting more secure, in contradiction to the claim made in the paper.
>>You've conflated privacy into this argument
I haven't conflated anything. I was illustrating a general principle using privacy as an example of the principle in action.
