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Bitcoin Releases Version 0.3
Teppy writes "How's this for a disruptive technology? Bitcoin is a peer-to-peer, network-based digital currency with no central bank, and no transaction fees. Using a proof-of-work concept, nodes burn CPU cycles searching for bundles of coins, broadcasting their findings to the network. Analysis of energy usage indicates that the market value of Bitcoins is already above the value of the energy needed to generate them, indicating healthy demand. The community is hopeful the currency will remain outside the reach of any government." Here are the FAQ, a paper describing Bitcoin in more technical detail (PDF), and the Wikipedia article. Note: a commercial service called BitCoin Ltd., in pre-alpha at bitcoin.com, bears no relation to the open source digital currency.
A base value for bitcoins is assumed to be the energy used to create it. The system itself appears to be far more profitable when operating at am exchange entity or trader. ie, the ability to control the effective value of the coin in question. Which lends the whole process to feeling more like a pyramid scheme than anything else. Now, if you wanted a lossy system that was anonymous and had morally bankrupt exchange locations it would be useful anywhere an anonymous transaction is a must.
On the flip side, because wealth is always being generated for free, a purpose built rig which excels at generating coins more efficiently would essentially be a living cash machine. This would in effect mean that the coin itself has no actual value. It's worthless because it cannot be returned to the previous state. This is somewhat important to me when a system is based on the trade of goods.
In terms of actual exchange it introduces to much latency to ensure the transaction is actually valid. In terms of instant gratification the whole thing begins to break down.
The good news is that anybody is certainly free to use it. Unfortunately, because anyone can print money (even small amounts) I'm not going to be giving up any of my items today.
"You should always go to other people's funerals; otherwise, they won't come to yours." -- Yogi Berra
from wiki
The assumption that the longest one is the oldest and most reliable is invalid, Since anyone can peer, there's no reason that a peer can't fake itself as 20, 30, 100 peers, and, working on a very fast machine, produce a longer chain quickly than an older peer.
New currency can be generated by solving difficult math functions (cryptographic functions)
Since these functions take a certain amount of energy (electricity) to complete, the value of the currency is driven towards the price of electricity.
It's similar to mineral mining: on average you have to spend a certain amount of time and effort to mine a certain amount of gold, and this tends to set bounds on the value of the gold.
i would say that any currency is backed by the goods and services one can buy with it.
the one way to make sure a currency is usable in daily trade is for it to be accepted as tax payment by local government.
comment first, facts later. http://chem.tufts.edu/AnswersInScience/RelativityofWrong.htm
The webmaster is resizing the host at Rackspace now. The site should be back up soon. Until then, feel free to come talk with the Bitcoin community about this on IRC: #bitcoin-dev on Freenode.
couldn't find anything on the 60's but this page from 2009 was interesting.
http://www.brianrwright.com/Coffee_Coaster/01_Columns/2009/090609_Liberty_Dollar_Game_On.htm
with the currency being made of precious metal and not being legal tender the worst that happens is you go for scrap value.
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I've installed the software (from Sourceforge) and I still don't really understand it.
I have an address to receive payments (1D3ojVLNgD7D5WEKdq37m291N3Cai5CHTU) but it seems I'll have to wait a while to generate a "coin" myself. When that's done I don't know what I'll do with it -- how could I spend it? Why would you accept it?
All money is virtual. Direct barter is the only thing that isn't, and even then only after the transaction has been completed. Precious metals are no different. The price of gold has gone up to 4x what it was a decade ago and it can drop again just as quickly. Clearly it isn't a reasonable, stable store of value. Also, traditionally the value of gold and other precious metals has generally been explicitly set by nations laws. For example the one sixteenth rule for the value of silver to the value of gold. So, although precious metals may have intrinsic value (the corrosion resistance of gold, its malleability and decent conductivity make it useful in many applications in small amounts, and silver is the most conductive metal and is vital in a number of chemical processes such as traditional photography) that has little relation to their traditional value, which has always been artificial. Sure, it's rare, but there are plenty of rare things in the world and some of them are considered valuable and others no-one cares about.
Gold-backed currency needs to have people believing that the government is actually going to turn the currency into gold (and not, say, end the gold standard).
It also requires people to hold a vastly inflated view of the value of gold because it is shiny.
Any idea how to do this for the Slashdot RSS feed?
At least 1oz of gold is worth 1oz of gold. In the case of dollars, a $100 bill is worth about the same as a $1 bill in tangible terms. You see, the same really neat paper (actually fabric) used to make the dollar plus the ink is the tangible worth. Sew a bunch together, and you can have a nice cape. Maybe you can affix some price to the pretty picture ... I don't know.
As long as the US gov't is around to say that the dollar is worth something (and they don't triple the number of dollars in circulation in a short amount of time), the dollar is worth more than it's raw materials.
This principle roughly holds for other fiat (look it up) currencies. At least gold is worth gold.
I'm curious- from the sound of this it would be a great way for botnet herders to turn their victims electricity bills into cash(assuming I can swap my bitcoins for regular pay-my-taxes cash somehow). What measures are in place to prevent this?
If faster computers cause the system to become more complex, thus slowing generation, then wouldn't the older computers become less desirable despite not physically having changed? Mathematically, how would this work out if I created the next "Big Blue", then after joining the network, suddenly I am the only one capable of generating a coin as the bar is raised higher than the peers are capable of reaching??
I'm trying to get this picture straight: The whole purpose of the blocks and CPU time metric is to get involved with the distribution of the initial set of money, not necessarily that the currency itself necessarily requires massive quantities of computing power.
BTW, it seems like this coin generation issue is something that can be used as an attack vector, and is a different issue than the problems associated with double spending the money. What kinds of safety protocols or protection protocols are in place to keep somebody from simply "minting" money at will?
I don't buy this argument, as found in the PDF file about Bitcoin. Mind you, I'm just skeptical here and not trying to say it is impossible to resolve, but I don't see the protocols or transactional security which is dealing with this issue.
I'm really curious about this particular issue and how a complete copy of the transaction's history doesn't need to be maintained. Again, it gets to the coining of the money issue, where it would seem as if the transaction trace would have to go back to when the money was coined in the first place. Some sort of planned decay of the history certainly could be used in terms of suggesting that after a certain amount of time it can be presumed that a certain bit of transaction history if valid (using a variety of metrics to make that happen that could even go beyond a pure timestamp measurement). Still, the option to view the full transaction history for what fan outs and inputs were associated with that transaction seems like a critical feature.
What is the problem with deflation? In the U.S. we had deflation for over a century and it worked out quite well. (Spiral deflation is only theoretical - it has never happened.) Hard currency has been used for thousands of years and there are no indications that any economy has resorted to mass saving or hoarding. People generally enjoy spending money and growing their wealth; it's human nature.
Inflation, on the other hand, is the root of much evil. It has utterly crushed economies and created conditions ripe for mass-murdering, genocidal tyrants to come to power. Deflation has never done such a thing.
Money makes trade between two parties much easier because without some form of currency we would have to rely on a Coincidence of Wants. It also acts as a method of informing producers what consumers are desiring, generally in a way that is much more efficient than centralized control.
There is nothing wrong with interest, per se. It allows those with capital an opportunity to increase wealth and those without capital an opportunity to create wealth. Both parties win.
Increasing taxes generally has the effect of reducing economic activity (Laffer Curve). Using taxes to control the money supply would have the effect of destroying production.
The concern of the solvency of the lender should only be for the interested parties. However, in your example of fractional-reserve lending this can really only be practiced with paper currency. In order to make a loan, the currency must be provided. If a bank has $10 of deposits and wishes to make $15 in loans, it must find the extra $5 from some place. In the case of a hard currency, it must find another party to provide the $5, but in the case of a paper currency, it simply gets the money from the central bank at some interest rate that is probably at a rate below what the market would demand for that money.
Inflation, even a 'small' amount, has the effect of encouraging malinvestment. When people know that come time to retire, that $10,000 they added to their savings this year is only going to be worth $5000 when they retire, they know that they must put this money some place to protect it from inflation. But people are generally poor at choosing places to invest their money, and they are downright awful when they feel pressured to do so. They invest in stocks that don't give dividend yields; they invest in real estate and have no idea why. In short, they invest in things that are beyond their understanding because they feel pressured to do so. OTOH, if there were instead a small amount of deflation, convincing people to part with their money would be considerably more difficult. Since the average person could be confident in knowing that a penny saved is truly a penny earned, not some fraction thereof, they would stick with what they know, and the economy would grow more efficiently.
It is the paper currency that is the root of evil. Many try to speak of it as if is some new concept; the next evolutionary step after gold, but fiat currency systems have been around for thousands of years, and every society that ever engaged this policy has gone bankrupt, including Ancient Rome.
I once took an excursion to Reddit, and later HN. Unlimited up/down voting sucks when dealing with a hive-mind.
For fifty years, the only valid currency has been crude oil. All national currencies trade against the cost of a barrel of oil. What makes you like gold? It's just soft yellow metal. You can't fill your gas tank with gold. Military might (which is the backing for most national currencies) is certainly more useful than your silly gold.
Well, they were told to stop with their "timeshare" currency (if that's what you are talking about), because the Constitution gives the Federal government exclusive prerogative to mint coins, but that's not why they went to jail.
They went to jail for tax evasion. If you live in America, you have to pay American taxes, even if you make up some phony currency for your transactions. Those people didn't pay their taxes.
I pretty much agree with all of that. Screw those tax cheats.
I wrote about the problems in the Eurozone that arise from having conflicting monetary and fiscal policies in a blog entry linked to below. Basically put, the Eurozone forces member states to have materially identical monetary policies due to the unified currency and centralized state banking. Under such circumstances, nations are unable to compensate for national situations using fiscal policy alone, and their attempt to do so is a large part of what has landed Europe in the fiscal mess they're currently in.
http://www.mrnaz.com/?s=publish-blog&entryid=208
I hate printers.
Because when it was on the gold standard, this was a reasonable idea.
When nixon axed the gold standard, and the rest of the world DIDN'T revoke the reserve currency status, we affectively gave the US/US Government a blank cheque with regards to how much money they can print.
However, recent events have brought this to light, and you can bet your arse that china, et al won't continue buying T-bills for much longer.
And when they stop, the US economy is fucked.
I run: Windows, OS X, Linux, FreeBSD. Just because you have a hammer, doesn't mean everything is a nail.
State-based (and territory-backed) currencies existed in the United States well into the 19th Century and even partly into the 20th Century in the case of the Alaskan Gold Rush. It was something directly tied to a lack of liquidity and the fact that the economies of those regions needed an extra jump start to get something going.
Usually state-backed currencies in the 19th Century had a one to one relationship with the U.S. Dollar, so it wasn't as big of a deal. The Federal Reserve wasn't established until 1913, and has always been built around the concept of electronic funds transfers... starting with the telegraph.
There was "cheating" involved with private and state notes and it has caused other sorts of problems with them including bank runs and panics, particularly when the money couldn't be paid back to the commodity (usually gold) or federal currency that it represented.
America hasn't always had a central bank, and arguably it isn't needed either on the principle it may do more harm than good. That, however, is the subject of a whole other thread or better yet another story.
There's nothing wrong if a ship full of gold sinks. It increases the value of gold. The problem is massive inflation, as all fiat currencies have or will experience. Gold mining is a tiny fraction of the current amount of gold held by people, so it doesn't have any noticeable effect.
Gold not used for anything? Ignorant post is ignorant. There are many uses for gold, both for industrial and non-industrial societies: http://geology.com/minerals/gold/uses-of-gold.shtml
The world's entire gold reserve only increases by about 2% per year via mining, and much gold is lost due to actual loss (people dropping things) or throwing things out (all the electronics with gold components that don't get recycled).
And deflation is *not* such a bad thing. Inflation is much, much worse. Go read Peter Schiff. Educate yourself. Economies cannot expand forever, nor should they be expected to.