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BitCoin, the Most Dangerous Project Ever?
Jamie found a followup to the bitcoin story we've been following awhile. The article talks about the untraceable, un-hackable nature of BitCoin. They can't be locked down like PayPal, and the article predicts that governments will start banning them in the next 18 months.
What a badly written sensationalist story. It's like something from the Daily Mail
"Bitcoin is a P2P currency that could topple governments, destabilize economies and create uncontrollable global bazaars for contraband."
I hate to tell you this, but this has already happened with regular-government issued legal tender.
Look at druglord Mexico, most 3rd-world countries, and the US with its billion-dollar Wall Street bailouts and ponzi schemes. Bitcoin would be a little late to the game.
He who knows best knows how little he knows. - Thomas Jefferson
BitCoin should be banned because we want our currency to be as safe and stable as the U.S. dollar.
I could only read that article with the late night salesguy's "These collector coins can only go up in value!" voice, but the content of the article was all about how it's clearly a scam and the author is obviously in on it.
I read the internet for the articles.
And how is the world economy going to function with a currency that maxes out at 21 million?
Let's pretend for a moment that no other digital currencies will be created - bitcoin will be it.
I'm not sure whether bitcoin will work out or not, but who cares what the absolute upper limit is to the currency? The software currently supports 2 decimals and the bitcoin themselves support division into "bitdust" of 1/100000000 bitcoin. So there are 2.1 quadrillion individual units. That ought to do us. There are perhaps 55 trillion "dollars" out there in the world. That's 1/4 of the economy so you need roughly 220 trillion dollars for the world economy. We use two decimal places with dollars, so the smallest unit is actually a penny. That's 22 quadrillion pennies to make the world go round.
W..w..W - Willy Waterloo washes Warren Wiggins who is washing Waldo Woo.
I still have no clue what this 'bitcons' are. Can anyone give an explanation not stepped in sensationalism?
Simply put, it's a form of digital cash. Its main advantage is that it's a peer-to-peer thing, so there's no central authority (aka PayPal or Visa) to shut it down, or to block payments from anyone to anyone for political purposes. For instance, there's no way to prevent someone from donating to Wikileaks if they want to. Like cash, there are no chargebacks, which is either an advantage or disadvantage depending on your point of view. The cryptology makes it rather secure and prevents people from issuing a double-spend, or "writing a bad check" so to speak.
There are a few other aspects, such as low transaction fees and its status as a deflationary currency, and backing up the wallet file because suddenly you are your own bank and are in charge of your own security, but you don't need to know much about that unless you're interested in learning more.
At the moment, it's more of an experiment or proof-of-concept, though it's rapidly expanding beyond that. It's a currency in that it has value because people believe it to have value and are willing to exchange it for goods and services. The market is somewhat shallow at the moment, but it's growing all the time. An interesting project to watch, at the very least.
I believe they mean it is peer-to-peer, so there is no middleman, unlike something like PayPal where PayPal is the middleman, so it can't be traced unless you are there. In addition, if it doesn't save the "from" source after the transaction, there is no way to tell where the money came from.
Seems like it would make money laundering and tax evasion easy. Of course, there is an easy way to fix that as far as drugs go - make all drugs legal and tax them, then spend the money that went into enforcement on education (like Portugal did).
I agree the article is badly written. Transactions take place between public keys. As a public key is just a big random number, they are essentially "anonymous" unless the key is linked to your identity somehow - for example, because somebody you traded with told the police "I sent X coins to Eldavo John and he used address Y".
That's why it's better described as pseudo-nonymous rather than fully anonymous. It's possible to break the anonymity if people co-operate. I'd say it provides about as much privacy as the regular internet does. An IP address is basically private to regular citizens. If you represent law enforcement and turn up at a bunch of companies with the right paperwork you can make everyone work together and the privacy of the IP address falls.
Well, to handle Bitcoins today all you need to do is install and run the software from bitcoin.org. It runs just fine on regular servers, desktops and even laptops - hardly expensive infrastructure. If the system takes off and traffic levels reach PayPal levels, running it on a laptop won't be feasible anymore, you'll need some kind of high end server. If the system really takes off and starts matching VISA, a node would have to be distributed and might take a rack of machines. It never really gets infeasible because there is a "lightweight mode" in which the resource requirements are much lower and the security properties are slightly weakened. In this mode it's quite possible to run the system on a smartphone. Your device is independent, but if somebody is able to overtake the networks hashing power it can be made to believe anything. Right now that's 1-2 terahashes/sec, not something that's going to be beaten by anything except rich, sophisticated organizations (big tech companies or governments).
But I think your question/pondering is more about whether Bitcoin has value beyond mischief. I think it clearly does, otherwise I wouldn't be working on it ;) The existing electronic payments system isn't that great, really. To pay for something instantly over the internet today you have to use credit cards. Wiring money is an alternative but due to outdated banking systems it's extremely slow, money moved this way often moves slower than a physical truck would even though the transfer is actually electronic. It's also quite expensive.
Credit cards have a bunch of problems for both buyers and sellers. For sellers the biggest problems are chargebacks and the costs of taking part in the system. It's really hard to handle chargebacks. Big companies use sophisticated risk analyses to try and spot unusual behavior, smaller companies just bump the price of everything by 10% to handle the fact that some payments just won't happen. The costs of taking part are also a problem. You can't just install some software on your web server and go. Credit card details are basically big passwords, but in an inconvenient form that you can't change and that every merchant you buy things from must be given. Unsurprisingly, this is totally insecure even with the PCI auditing process that is intended to ensure merchants keep CC data safe. See the recent Sony breach for an example.
Credit cards aren't really great for buyers either. Whilst chargebacks are useful, you can't opt-out of the ability in order to get lower rates from the merchant, or set up some other kind of escrow scheme. For another, the system is very inflexible. Whilst you can theoretically take steps to secure your CC credentials better on your end, the fact that you share them with anyone you buy things from makes such effort mostly worthless. Finally they are kind of inconvenient. Despite being one big password you usually have to type in several long, hard to remember codes and
The Bitcoin proponents seem to think this is some really amazing idea that is like Cryptonomicron come to life and think everyone else should get on board. The rest of the world thinks bitcoins are retarded and doesn't use them.
To me this seems like just more hype, but trying to go at it from a scare part: "Oh these things are so amazing and dangerous that the government will ban them!" Trying to play on people's love for things forbidden.
Of course it is also rife with problems, one of the biggest being the whole deflation thing. Deflation is something that strangles an economy badly. People want to spend as little as possible, since you get more for the same money in the future, which of course means there is little spending and little spending means little trade which means the economy goes to shit.
Anyone who is in love the idea of deflation because "My money will be worth more," need to go retake ECON 201 and learn what money really is and why we have it.
Any current that has built in deflation is a really. really, bad idea.
Bitcoin is a P2P currency that could topple governments, destabilize economies and create uncontrollable global bazaars for contraband.
I don't want to rain on the guy's parade (or do I?), but governments don't combat "uncontrollable... bazaars for contraband" by eliminating the currency used in said bazaars, they do it by sending heavily-armed soldiers to break up the party.
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Why is it that every explanation of bit coin, including your attempt, is incoherent. Given it can't be explained I think it's a scam.
I have many questions in part because the basic schema is not clear. I've watched the videos and read the sites. But there just is no explanation that makes a whole coherent sum and there are contradictions when you piece the various explanations together.
1) On a torrent network, not every node knows where all the slices are. Not all nodes are in communication. Thus what happens if I sent 30 bit coins to Amy and then I sent the exact digital copy of those coins to Brad who is on a network remote from Amy. It sounds like Amy will query the local network to see if I own the coins and so will Brad. But because those queries never intersect on the same node both appear to be valid when in fact I just copied the money. Later on perhaps the system can't reconcile two people owning the same coins but by then I'm gone.
2) Suppose I send money to Alice. then a fraction of a second later Alice tries to send the same Money to Bob. How does Bob determine that Amy owns the coins? No node on BoB's network can validate my transfer to Alice.
3) the description has this trail of signed hashes being appended. Does this grow forever and can it be inverted to follow the money?
4) is each coin signed? or is it transactions?
5) if someone invents a way to make coins cheaply does this doom the system? What regulates the produciton rate? does this work if I have 1 million different user identities? if there is a central signing authority for this then what keeps this from getting cracked or printing their own money to flood the system?
6) what happens if botnets start mining?
how does this actually work, end to end, technically not operationally?
Some drink at the fountain of knowledge. Others just gargle.
This is not to say that all Libertarians are ignorant, but that Bitcoin appeals to Libertarian ideals and requires ignorance of how money works to be sold. Bitcoin has no in-built velocity. Taxing authorities won't accept them and having a fixed amount of them means that they don't have a debt-based life-cycle as does the money most of us claim ownership to. Also, even if Bitcoin were to take off, as demand for it increased, it would create its own valuation bubble where it becomes more valuable to hold the money than it does to invest it. Nobody would be able to borrow in Bitcoins at a reasonable rate of interest, real demand drops, then speculators are left holding a bunch of worthless digital currency. If you think that Bitcoin is a good idea, you are likely in need of an education in economics and accounting and need to lay off of the conspiracy theories.
Bartering is still taxed the same as income in every state I know of, and still counts as income for federal income tax purposes. E.g., if you give me a sheep for fixing your PC, I just had a taxable event at the prevailing market rate for one sheep. This is true whether it's goods or services that are exchanged. It does allow for some wiggle room in your valuation perhaps, but everything's negotiable anyway, so there's not much advantage over bartering. OTOH, it may be a bit easier to get your money back than to get your sheep back when you find out that the grain I exchanged was spoiled. Additionally, being left with a pot full of BitCoins when the music stops is like having a jug full of babysitter tokens -- absolutely worthless if nobody else wants them. The same is true of any fiat currency of course, or even backed currency if the underlying asset becomes worthless. The difference is that the full faith and credit of the US government probably carries a bit more weight than the full faith and credit of an anonymous internet startup. For now, anyway.
https://www.eff.org/https-everywhere