Guan

home

What’s the point of easy Bitcoin?

12 Mar 2015

(This is cross posted from Ello.)

It’s easy to see the appeal of Bitcoin to drug dealers and nerds like me. I can buy some Bitcoin, or mine it myself, and use it to make instant (well, 10-minute) payments without using the antiquated US dollar payment infrastructure.

Most consumers, however, don’t want to hold Bitcoin, because they might lose all their hard earned savings, and merchants don’t want to bother with that either. That’s why there is a slew of startups that make the Bitcoin payment process much easier. When I buy things from Adafruit, Bitcoin payments are processed by BitPay, who takes care of instantly converting my Bitcoin to US dollars. BitPay will then automatically transfer the converted dollar amount to the merchant using ACH or other national payment systems.

What if, like most consumers, I don’t own any Bitcoin and don’t want to be exposed to the risks of holding any? A company like Coinbase lets me instantly buy Bitcoin and send it to BitPay to pay for an online purchase. How do I pay for that? Coinbase prefers to withdraw the US dollar amount from my bank account using ACH.

Startups like BitPay and Coinbase have made it reasonably convenient for me to pay a merchant using Bitcoin, but it already looks like there are a few redundant steps here. If I pay using ACH, and Adafruit is paid using ACH, why can’t there just be a single ACH transaction? That way we could save half of the ACH fees (on one of the two ACH transactions) as well as the Bitcoin transaction fee.

So what’s the point of using Bitcoin here? Why not just use ACH payments? BitPay and Coinbase both comply with all the relevant laws and are registered with the regulators, so there’s not even any regulatory arbitrage to be had. In some ways, the easier you make Bitcoin as a payment system for regular folks, the less you actually need Bitcoin as part of that system.

Bitcoin has also been touted as revolutionizing small cross-border payments, such as remittances. But to make it easy to use, remittance solutions for Bitcoin have to interface with a “normal” payment system, whether it is dispensing cash at a retail store or domestic payment systems like ACH or the European SEPA. Companies like TransferWise and XE Trade have already disrupted the market for international payments the old-fashioned way, by maintaining bank accounts in each country and making domestic payments in and out of those.

The main advantage I can think of, for this type of consumer, is that Bitcoin can decentralize the centralized component of the payment flow. This allows each consumer and each merchant to use different providers at the endpoint. If I pay with a credit card, the endpoint providers are my card issuer and the bank that provides the merchant account. There is a lot of competition in the market for card issuance and merchant accounts, but a centralized network connects all the card issuers and merchant accounts. (Indeed, operating such a network is very profitable.) I don’t have to use Coinbase, or any particular card issuer in the case of debit and credit cards: I can use some other company. And I can still make easy payments to Adafruit.

For domestic payments, we can cut out Visa or MasterCard as a middleman, but we cannot cut out ACH. At each end, we could, however, replace ACH with something else.

For international payments, TransferWise is easy and cheap enough. But what if I want to make a payment to a country that TransferWise doesn’t support? I can use a provider in my country to convert dollars to Bitcoin, and the recipient can use a provider in a different country to convert Bitcoin to local currency that is transferred to his or her bank account. I think this is a minor improvement: if we both live in countries supported by either TransferWise or XE Trade, it would be easier and faster to just use a single provider for the whole transaction.

The real problem with sticky navigation, illustrated

10 Feb 2015

There are many reasons to hate sticky nav bars, explained by Felix. They are annoying. They take up valuable screen space on mobile devices. They are often pointless, for example the Slate mobile one that only shows you the title of the article. I wrote a Safari extension that kills them on a view sites.

Felix mentions the real reason sticky nav is super evil: it hides content.

I often read articles by using the spacebar or page-down button to scroll. Almost all browsers implement this function, and it simply scrolls down a page. But because sticky nav is layered on top of content, instead of being separate from the page like frames used to be, it hides whatever is under it. That is not a problem when you scroll in tiny increments. It is a problem when you want to scroll a page at a time, which is much faster.

Here’s an example from Fusion.net, a site that recently relaunched and has sticky nav. I’m innocently consuming some content:

stickynav

That last line ends with “they always”. Now I hit the spacebar:

stickynav

Does that say “They came home the way they always of-date one”? Should I submit this to Language Log?

No, it turns out that a line is being hidden under the sticky nav. Here is the missing text:

stickynav

Kill sticky nav!

Is the US government funded?

19 Nov 2014

Yes!

The US government is funded through September 30, 2015.

H. R. 83/Public Law 113–235

Please donate

Scotland will not be an independent country

19 Sep 2014

The final result is in: with 55.3% of Scots voting no, Scotland will not be an independent country. As someone who supported independence, I am of course sad. Scotland will be worse off politically and worse off economically.

At this point, it is hard to judge whether the result will be interpreted as a mandate for the status quo, or whether Scottish voters relied on the promises made by the major UK parties or the more extensive promises of a written constitution made by Gordon Brown, who has been given an adjournment debate in the House of Commons on October 16. David Cameron has already promised that nothing will happen before the next UK general election in May 2015.

Even before the final result had been declared, we started to see expectations of more devolution scaled back, as we did before polls opened. My own prediction is that a few years from now, Scotland will still be left with fewer political powers than Nova Scotia and fewer fiscal powers than, say, the Danish municipality of Læsø, population 1,808. There will be no written constitution that protects the existence of the Scottish parliament.

But let’s say something like devomax or home rule and a written constitution is actually delivered. The Scottish government would be responsible for most domestic policy and would raise the revenue for that with its own taxes, which could be different from English taxes (though absurdly, Labour appears to want to allow Scotland to have higher, but not lower, tax rates. EU membership means that there are some limits to how fiscally independent Scotland can be; for example there can only be a single VAT rate for all of the UK.) The relationship would be something like Austria–Hungary from 1867 to 1914, which had joint ministers for foreign affairs, defense and defense-related aspects of finance, but nothing else.

This degree of fiscal independence means that Scotland would still have to be economically sustainable on its own. If Scottish taxes pay for Scottish public spending, England would not want to cover Scottish deficits or help Scotland in the event of an economic crisis, which is the kind of risk sharing that pro-union activists see as one of the main economic arguments for rejecting independence. (The author of that piece was against independence, by the way.)

What happens when the oil runs out? That’s something that Scotland will still have to figure out within the UK. And there would be no flexibility on currency arrangements, while even an independent Scotland in a currency union could have eventually abandoned sterling. There’s a reason that David Cameron called increased powers inconsistent with staying in the union in 2012. If the UK political elite keeps its promises, they could create a much larger economic mess than independence would ever have been.

No to independence combined with more devolution means that the West Lothian question may have to be addressed. A separate English parliament could work, but David Cameron seems to want separate votes by English MPs for England-only legislation. This could happen with an English grand committee. It would still be the same UK parliament, so UK governments would need to form majorities in it. After a close election, we could see a UK government that cannot pass legislation for England, or that can pass English laws but not UK-wide ones.

What’s next? The general election for the Scottish parliament is in May 2016. The white paper on devolution is expected in November with draft legislation in January. And I predict another referendum in 2032.

Country size

16 Sep 2014

In a post on Scottish independence, Felix writes:

In terms of economics, bigger is nearly always better. On purely economic terms, Ireland would probably be better off it was part of the UK; Canada would be better off if it were part of the US; in Europe, it would make perfect economic sense for the Netherlands to merge with Luxembourg and Flanders, while Wallonia joined up with France. But no one in any of those countries actually wants those things to happen. These days, countries don’t merge (the reunification of Germany being the main exception): they break apart, like the Soviet Union, or Czechoslovakia, or Yugoslavia. Or, quite possibly, if Scotland becomes independent, Spain.

This lead to some discussion on Twitter. I pulled data from the Penn World Table and plotted GDP per capita in 2010 (the last year for which data is available) against a country’s population.

The relationship between country size and GDP per capita is not statistically significant, with a p-value of 0.34. This correlation doesn’t tell us that much: as Evan Jenkins points out, the fact that a small country is rich may help it stay independent. The point estimate is slightly negative because of a few rich small countries, mostly in Northern Europe, and a few large poor countries in Asia.

This is not exactly Felix’s point, however: he is making claims about specific counterfactuals. Ireland is doing quite well outside the UK now, but his claim is that they would be even better off if they were part of the UK. He later brought up the fact that Hong Kong has done quite well as part of China.

There are actually two types of counterfactuals we could set up. It’s almost certain that Hong Kong would not have be richer than it is today if the city had been part of China since 1949. It is very plausible that they would have been no better off if they had not joined China in 1997. Similarly, you could either ask if Ireland should have always stayed part of the UK, or if Ireland should join the UK now, and you might get different answers. It’s clear that Ireland has done very well as an independent country, and we have a nice control group for that.

How might it help if a country is larger? At very small sizes, there are immediate economies of scale. A country needs a central government (but large countries may need larger governments at lower tiers), laws, a supreme court, a UN mission, a network of embassies, a country code top level domain, etc. The World Bank sets the threshold for a “small state” at 1.5 million people.

Beyond that viability threshold, a large country can benefit from larger markets, a single language or at least a lingua franca, and tighter integration through both labor mobility and fiscal transfers which can help with shocks: if one region is experiencing a negative economic shock, for example an agricultural region experiencing a drought or a regional natural disaster, then the other regions will help. Workers can also move from poor regions to rich regions.

Larger countries may be better able to help its less fortunate citizens or regions, but they may also be less willing to due to lower political cohesion and dimished solidarity. If transfers to a particular region continue indefinitely, for whatever reason, that can in itself create new political tensions or make existing ones worse. That is particularly true for political tensions created by the fact that the state is an amalgamation of existing countries. You may be willing to indefinitely subsidize an area that feels like part of the same country—all countries do that—but will you be willing to subsidize an area that feels like a different country?

Indefinite transfers to a region can also reduce the pressure for structural reforms when they are necessary. Since a region of a country will usually not have its own currency, you cannot make adjustments through the exchange rate.

Large countries also tend to have hard to resolve tensions between the central government and the regions. You can let regional governments have a great deal of autonomy, and taxing and borrowing power (tiny Denmark lets its 98 municipalities tax income and borrow), but then you need to keep them in check and you could end up with the same difficulties with debt and potential bailouts that a currency union brings. If you centralize everything, like in Britain and particularly England, you get other problems.

Some, but not all, of the economic benefits of large countries can be realized through trade agreements and tighter regional cooperation such as NAFTA and the European Union.

My quick takes on some plausible reconfigurations of countries:

  1. Would Ireland be better off in the UK? No.
  2. Is the Mezzogiorno better off in Italy? It’s poorer than Greece! Probably not.
  3. Is Hong Kong better off in China? Yes.
  4. Would the Nordic countries be better off as a single country? No, it’s a wash. They’re rich and integrated enough.
  5. Would the Baltic countries be better off as a single country? Yes.
  6. Would Portugal be better off in Spain? Yes.
  7. Would Singapore be better off in Malaysia? No.