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Bitcoin Is Not Anonymous
An anonymous reader writes "Researchers from University College Dublin have conducted an analysis of anonymity on Bitcoin, and found it is not inherently anonymous, and that in many cases, users and their transactions can be identified. They use techniques such as context discovery and flow analysis to investigate and visualize an alleged theft of Bitcoins, which, at the time of the theft, had a market value of approximately half a million U.S. dollars."
Bitcoin in the new Twitter. No matter how many times you post about it, there's still only a dozen people who care.
Drinking several litres of Coke everyday is not healthy, yet morons will continue to believe that it is.
Too bad it is merely a academic explanation of what was already known about Bitcoin. At least I can point to this when someone asked for references when I criticize Bitcoin as impractical for the many purposes fanatic proponents advertise.
No shit. Every transaction is public and permanently recorded in the block chain. Of couse it's not anonymous. The best you can hope for is making it hard for others to identify you and plausible deniability by using different accounts for every transaction and laundering the coins.
Please stop posting this shit.
I know you're getting paid, but goddammit when the majority if your user base thinks it's spam, quit fucking pretending it's a story.
Anyone who spells "liter" as "litre" is a moron.
Moron.
Or maybe he/she was born in the United Kingdom?
Born in the United Kingdom.
I rarely respond to comments. Also, don't ask for clarifications: a brain and Google are faster, believe me!
Anyone who spells "liter" as "litre" is a moron.
Or French.
Anyone with half a million dollars worth of bitcoins is probably up to no good. At the very least they need to have their head examined for buying monopoly money.
I wouldn't give you jack for them. Can I pay my utility bills with them? No. Can I may my mortgage with them? No. Can I go into most shops or online stores and buy stuff with them? No.
They're nothing more than a financial toy for people to play around with and waste energy on GPU calculations which they justify by reeling off a list of websites no one has heard of where you can buy useless crap with them.
Except that both spellings are correct.
Litre
Anyone who spells "liter" as "litre" is a moron.
Ah, so I get everyone writing British English (guess where English originated!) is a moron?
Moron.
At least you admit, by your signature, to be a moron yourself. :-)
The Tao of math: The numbers you can count are not the real numbers.
In order to analyse whetehr Slashdot is overly preoccupied with Bitcoin, I have conducted a rigorous scientific analysis. My methodology relies on the key fact that Google knows everything. To draw on the wisdom of Google, I typed slashdot into my Google search bar. The results are revealing:
Google suggests (in this order):
slashdot
slashdot rss
slashdotted
slashdot wiki
slashdot bitcoin
Phrases such as "slashdot linux", "slashdot news" and "slashdot " did not appear.
I'm still working on the conclusions.
It's much worse. It's pushing the value of time and energy over to other commodities needed to power the servers. Think coal and natural gas power generation. We simply don't have the renewables in place to offset and eventually lower the cost per kw. That will tens of years if anything. If instead it was crunching numbers for research such as Folding@Home, I can see human value in that. But to pull megawatts of power to essentially run a scam is really bad. Of course, one could say the same for the high frequency trading server infrastructure as well.
Life is not for the lazy.
It's a French word, you moron.
Metre
Litre
Centre
Acre
Fire
All end in a soft "er" sound, you moron.
Moron.
Satoshi and the other devs had absolutely nothing to gain in Bitcoin. If you think they are using it to generate cash you are probably incorrect. So I don't see how it can be a scam...
I hate bitcoin hurr durr.
People need to learn the difference between anonymity and pseudonymity. Bitcoin is not anonymous, and neither are so many other things mistakenly labeled anonymous.
In the context of Slashdot:
AC == Anonymous
handle == pseudonymous
handle linked to meatspace identity == identified
Pseudonymous actions are those where an arbitrary identifier (handle, public key fingerprint, assigned account number) completely replaces the meatspace identity a person has been assigned by government.
Pseudonymous actions by a specific identifier (such as as Bitcoin key) can be linked to other actions by that identifier.
Anonymous actions have no primary key linking together events by a person or group of persons acting in concert.
An anonymous payment would be something like cash in the mail, so long as the envelope is devoid of any identifer, assigned or pseudo, which could connect that envelope and its contents to another action by the person who sent it.
How does this ponzi scheme continue to proliferate and have any value at all????
What if you could somehow combine them both? Somehow make the bitcoin be a unique hash of some manner of @home CPU time, be it SETI, Folding, whatever. As a result the coin has some intrinsic value behind it, because it's representative of research being done. Granted, that still doesn't change the fact that no one will necessarily back it, giving it any value, but it might be a starting point.
Honestly, I think the government should back something like this with real money (given, at very small, manageable, rates) in some even just token effort to help push science.
Support the EFF and Creative Commons. The war is coming, and they're supporting you...
I'm convinced they did it for the lulz.
They probably invested in AMD and made their money watching all the knuckleheads buying multiple Radeon 5870s.
You are welcome on my lawn.
>crunching numbers for research such as Folding@Home
Number of widely-successful global currencies created through bitcoin mining: 0
Number of cancers cured through folding at home: 0
Given that neither distributed computing network has proven successful, I'll stick with the one that earns me real money for my work.
I love going down to the elementary school, watching all the kids jump and shout, but they dont know I'm using blanks.
That energy is actually put to a good use - it provides security for the block chain against double-spending attacks, by making them computationally infeasible. And it gives pretty good value for the money: as far as costs go for a payment-processing network, it's damned cheap compared to what Visa or Paypal charges.
Yes, early adopters come out well. That's true in any venture. But at the end of the day, that doesn't mean it won't be useful as a payment processing network. The amount that early adopters will get out of this utterly pales in comparison to what the big financial corporations are raping you for.
If you think THIS is a scam, read up more on fractional-reserve banking. The debt-driven US dollar is the biggest ponzi scheme ever.
What they fail to do is identify the thief!
Perhaps the margin of their paper was too small to include the thief's name.
It's spelt "litre" in the United Kingdom.
Oh no... it's the future.
Oops, I replied to the wrong post.
Oh no... it's the future.
It's 'accept', and the person you responded to was pretty obviously trolling all of our UK friends out there... :)
From the Wikipedia article:
"A common criticism is that the initial bitcoin distribution is heavily advantageous towards early-adopters. As stated, bitcoins are distributed ("generated") as an award for the solution to a difficult proof-of-work problem. The drawback is that the amount of work that has to be done for one bitcoin is currently over 500,000 times more than the amount of work at which the first bitcoins were going. As more people join, and also because of a reward function that halves the number of rewarded bitcoins every so many blocks, it becomes harder to generate bitcoins over time, using the same computing power."
Initial group of users get the advantage... The more users join, the more value the initial group owns.
I'm thinking of a shape. A polyhedron. Followed by the word "scheme".
Entomologically speaking, the spider is not a bug, it's a feature.
First of all, absolutely no service is anonymous, you are just trusting different entities with the information. Some people say bitcoin is anonymous because it doesn't require state ID and a signature to send money, which is a fine definition. Identities can trivially be created or destroyed in bitcoin, and if someone is careful, then it can be very hard to prove who controls which identity. I find it funny that the whole premise of the article is that it's not anonymous, and for their case study they pick a large theft, and still know absolutely nothing useful about the thief's identity.
Per the Bitcoin FAQ
https://en.bitcoin.it/wiki/FAQ#Is_it_not_a_waste_of_energy.3F
I call BS! It's certainly a waste of energy.
Certainly they could encapsulate those "specific features" within the data stream and be stripped back off when importing the data for research. Right? That may or may not be possible depending on the premise and foundation of the protocol. But it doesn't seem like they even wanted to make the attempt here.
Life is not for the lazy.
If you advertise a bitcoin address in a forum post asking for donations, of course they can Google the result, and identify you.
If however, someone were to transfer their bitcoins to 20 different wallets, each random amounts, at random times. And then mix them into a pool such as mybitcoin, it is impossible to trace the origin. The bitcoin client sends oldest bitcoins first, so when they withdraw from mybitcoin, they will never get the same as they deposited.
If it makes you feel any better, there are only a small handful of HFT servers in the world. But they are horrendously wasteful. They even consider CPUs consumables on those things, they run them overclocked to high heaven and just pop in new ones when they burn out.
"When information is power, privacy is freedom" - Jah-Wren Ryel
It isn't a waste of energy if you were one of the early adopters and could easily mine coins before the curve dropped significantly.
Funny how the early adopters get more coins and more abilities to spend the coins? Concidentally, it would be nice for them if the currency got adopted and coins could be cashed out at a high value.
Funny of how that almost matches the definition of a pyramid scheme. It technically isn't a Ponzi scheme, but early on, you get lots more reward, while late comers get next to nothing.
Bah. At least the BitCoins will be trading well with regards to Beenz or Flooz...
If they're hot swappable, they could design a magazine clip system where as the old CPU gets ejected and a new one loaded into place. If they're going to view CPUs as a disposable commodity, there are more efficient ways.
OTOH, they could hire someone minimum wage to swap out blades and manually replace the chips while offline.
Life is not for the lazy.
I generate my bitcoins on a rack of servers powered by Solar panels and enslaved squirrels on treadmills you insensitive clod!
Do not look at laser with remaining good eye.
This is exactly how all pyramid schemes work.
Bitcoin might as well be called amway-coin.
Do not look at laser with remaining good eye.
They don't even shut these things down to swap the chips, they just pull the blade and change the chip manually. I wouldn't be surprised if they come up with a magazine system at some point, if the competition is losing 2% of their processing power for 3 minutes and you can cut that loss of power on your side down to 10 seconds, that could give you a meaningful advantage.
"When information is power, privacy is freedom" - Jah-Wren Ryel
The amount that early adopters will get out of this utterly pales in comparison to what the big financial corporations are raping you for.
Bollocks. The big financial corporations haven't taken 80% of all the wealth in existence.
I am trolling
Well... you can buy illegal drugs from Silk Road with them.
But can you buy a senator or two so that they'll get taken down to CII or lower, which any doctor can prescribe?
That said, I bet you could find *someone* who wanted to part with money in exchange for a certain amount of Bitcoins.
The value derived from that is limited due to the difficulty of finding someone. Once more well-known merchants start accepting BTC payment for goods, the value proposition might become easier to see. Let me know when that has happened.
What would you have it be, then? If you gave out proportionately more BTC as the number of users grow, the inflation would be insane. So it's 500 BTC per hour, divided among everyone. Yeah, as the number of people grows, your slice becomes tiny. Now you have to earn (or exchange earned money for) bitcoins. Why is it shocking to have to earn your currency?
Bitcoin at its core isn't about making money through mining. It's about having a currency that gets rid of a lot of the disadvantages of current paper currency and payment processing systems. The rapid growth of people participating is making it much more valuable in that regard. You only get "next to nothing" if you were looking for a free handout. For the rest of us, it's a way to actually buy goods and services. For me, the advantage is I dislike and distrust Paypal, and I very much welcome a replacement that isn't tied to yet another flimsy or greedy company.
I call BS! It's certainly a waste of energy.
While I tend to agree, opponents of Bitcoin seem to be falling into a Streisand Effect trap - the louder you shout, the more you hurt your cause.
If you think THIS is a scam, read up more on fractional-reserve banking. The debt-driven US dollar is the biggest ponzi scheme ever.
Sounds like something that should land a person in federal pound-me-in-the-ass prison.
"Action without philosophy is a lethal weapon; philosophy without action is worthless."
No one cares about bitcoin except those stupid enough to 'invest'
The debt-driven US dollar is the biggest ponzi scheme ever.
It's not a ponzi scheme if EVERYBODY plays.
I see this article was contributed by "anonymous reader." I suppose he doesn't want to take responsibility for bitcoin transactions! "Anonymous" sure has gotten a lot of attention lately!
That bastard 15iUDqk6nLmav3B1xUHPQivDpfMruVsu9f !! Call the cops! :v/
This is the perfect example of the self-perpetuating machine that IS modern, academic research-grant grabbing.. ;)
Tweeks
Number of widely-successful global currencies created through bitcoin mining: 0
And bitcoin has only been around for so long. I don't care about bitcoin, nor do I plan to use it (or think that this will happen), but I don't think you should expect change to happen that quickly.
I'll stick with the one that earns me real money for my work.
I agree.
Filthy, filthy copyrapists!
Good use is in the eye of the beholder. We will remember bitcoin as a failed experiment, you will still be relatively broke and overly opinionated.
Actually they do in fact own around 80% of USD in existence in the form of debt. Fractional reserve banking is pretty amazing when you dig into it.
Anyway, as for the large number of coins that were mined and never circulated, I honestly don't think it's people trying to take advantage of it like a pyramid scheme. If that was the case they'd have cashed out en masse during last month's valuation bubble. The exchange trade volumes never really got that high - which indicates this isn't a pump and dump, but something else. I believe it's two things: #1, a lot of them were mined on a whim, but people can't be bothered to actually set themselves up to move them; or #2, a lot of them were mined on a whim, and then the wallets lost and discarded when people lost interest.
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It's good to know your magic 8 ball is working perfectly. :)
Perhaps it will fail, but I see it gaining acceptance and recognition. It's useful now for things that Paypal, Visa, etc have found politically unpopular, like donating to Wikileaks. It makes small personal transfers easy. It has value. I think it's much too early to just dismiss it offhand as a failed experiment.
Bitcoin is supposed to be a currency. WoW characters or items are NOT a currency not is anybody pretending it to be. Neither are paintings currency, there is no exchange anywhere in the world that even pretends at giving a dollar price for a painting. At best you got auction houses but next thing you will be claiming my labour is a currency just because I can sell it.
Bitcoin by claiming to be a currency claims to be something more then trade items that have a value if someone is willing to pay it. A dollar has a certain value. The way it has this value is rather insubstantial but because enough people subscribe to it it works. I can exchange my dollar for other established currencies and goods/services at a fairly stable rate.
But really, virtual currencies are so last bubble. Back then people believed totally in them as well. Where are they now?
Value only has meaning if enough people buy into it. A rembrandt has value because a lot of people regonize this. My paintings are at least as good (my mom told me so) but they don't have any market value.
You can just create a currency, if you could the Greeks would have done it by now.
To think otherwise to to live in la-la land. The world just doesn't work as it does in your cyber-punk novels or whatever trash you been reading.
MMO Quests are like orgasms:
You may solo them, I prefer them in a group.
It is possible, but highly unlikely that Bitcoin will be used on as widespread a basis as paypal, let alone Visa (and MasterCard). If you think that when widespread, that the bitcoin system will not be used by banks and intermediaries to perpetuate a fractional-reserve system of credit (possibly by forking the bitcoin system), I think that you are going to be disappointed even if bitcoin becomes popular. There might be a few takers on the other side of that bet on intrade or at the long now foundation.
Correct; however we do care about proper punctuation. Now stop that or I'll send you to bed without dinner.
Let me guess.. you invested heavily in bitcoins?
Actually, it still is. The money supply can only keep expanding as long as debt keeps increasing. Once everybody has taken on all the debt they can handle, the money supply will *have* to contract (which will be catastrophic to the economy), or the fed will have to issue money like mad to keep stringing it along (which will be catastrophic to the economy). The pyramid still eventually runs dry even if everyone's bought in.
I care. It is at the nexus of technology, finance and privacy. I guess you would rather see /. turn into another wired or gizmodo clone with nothing but vapid product reviews.
;)
I rarely respond to comments. Also, don't ask for clarifications: a brain and Google are faster, believe me!
The 'work' involves searching for a very hard to find hash. The result has to be legitimately random, in order to prevent tampering.
If you can figure out how to process 'real data' and still keep it 'random', then you can certainly raise it.
Are we still calling it Buttcoin? I thought Bitcon was even funnier, myself... :)
Each person who spelled "spelled" as "spelt" is also a moron.
Morons.
That energy is actually put to a good use - it provides security for the block chain against double-spending attacks, by making them computationally infeasible. And it gives pretty good value for the money: as far as costs go for a payment-processing network, it's damned cheap compared to what Visa or Paypal charges.
I'm willing to bet that if Bitcoin ever becomes as widespread as Visa, then the cost of the instructure will become at least as big as the cost of the Visa infrastructure. In the meantime, it's already a lot of wasted energy.
Yes, early adopters come out well. That's true in any venture. But at the end of the day, that doesn't mean it won't be useful as a payment processing network. The amount that early adopters will get out of this utterly pales in comparison to what the big financial corporations are raping you for.
It's extremely easy to design a system with all the advantages of Bitcoin, but without this absurd bonus for early adopters. In fact, if a system similar to Bitcoin ever becomes widespread, I think it will be a fork without this ponzi-like structure.
The amount that early adopters will get out of this utterly pales in comparison to what the big financial corporations are raping you for.
Okay, look, simply out of my deeply-rooted sense of diplomacy and belief that human beings are, on the whole, teachable, I'm just theorizing that the crackpot population (including you) has simply never had it explained to them that phrases like the one I boldfaced cause most rational people — and, by extension, the ones capable of actually doing something about the issues you believe exist — to stop listening to them and pay no heed to everything they've said to that point.
Otherwise, I can only conclude that your goal here isn't actually to convince other people to actually read what you have to say and do something about it, but rather just so you can read your own words on a big popular website and brag about this to your friends and family in a futile effort to convince them that you're not just a basement-dwelling shut-in crackpot.
Anyway, as for the large number of coins that were mined and never circulated, I honestly don't think it's people trying to take advantage of it like a pyramid scheme. If that was the case they'd have cashed out en masse during last month's valuation bubble.
The last bubble was too small to cash out en masse, that would have driven the price down to essentially zero. In fact a single compromised account has been shown to be enough to drive the price to essentially zero...
Nope. My wallet is under 2 BTC right now. I have no vested interest in pumping it.
Actually, I think it's overvalued right now due to naive speculative investors. Fortunately, the market's correcting well from last month's bubble: a nice slow slide downward rather than a brutal crash. I expect it to keep going a ways down, and indeed, I *hope* it does, until the value is more reasonably demand-based, instead of driven by speculation. I think that's what's healthy for its long-term stability.
All that said, I'm not an investor, just someone who wants to see the BTC succeed for my own needs as someone who needs to send money internationally on a regular basis.
Check out his homepage. He is peddling "finance" advice and forwarding people to advanced loan "services." Don't expect his ilk to ever promote something like bitcoin.
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Intrinsic value means that it can be used for something useful. The fact that expensive resources have been expended in making it doesn't in itself give it intrinsic value; there needs to be a way to convert it back into something useful.
Take for example the British 10p coin. That has an intrinsic value of 4.7p[1] because that is the value of the copper and nickel used in making it. There is an additional cost to melt down the metal and stamp it to the correct shape which makes it less likely that people will want to create forged 10p coins - they tend to go for more profitable £1 coins, but that does not increase the intrinsic value.
[1] Calculations carried out last night based on Friday closing prices at the London Metal Exchange and the then most recent USD/GBP exchange rate most likely from the Israeli markets as they are open on Sundays.
Oh, don't get me wrong - the Bitcoin computing infrastructure would be significantly greater than the amount Visa needs. The estimates I've seen are that BTC would need a full rack worth of 2U servers to compete with Visa... Which I think isn't really that big a deal for pushing that much money around. The rape isn't paying for Visa's computers. Visa rapes you for *profit*.
How would you structure the distribution of a fiat currency? Giving it out to the people running the network (miners are providing the processing to secure the transaction log) is a pretty decent way, I think. How would you do it differently? Who deserves the generated currency more?
"Funny of how that almost matches the definition of a pyramid scheme."
The funny part is that's how gold, stocks, bonds, and many other things work.
And I suggest that calling me a crackpot isn't the best way to get through either.
I'm not really trying to be PC to be convincing. I'm just having a conversation here, and that's how I phrase things in casual conversation.
Visa's got themselves lined up to skim a few percent off of damned near every transaction that happens, and they're really not doing that much work for it. Pretty much the whole modern world outside of the US is able to move money electronically without these middlemen. I feel screwed. OK, I'll quit calling it rape. But what woulds would you suggest I use?
And what do those first at a new gold discovery get? Oh yeah, more gold with much less work/cost than those who arrive later.
So physical gold mining is almost a pyramid scheme? And while physical gold mining technically isn't a Ponzi scheme...
I agree, but note that this is true of all currencies, fiat, gold (when it was one), seashells, private scrip, etc. So bitcoin is no different.
That is, the larger the economy of that currency, the greater the incentive to create (or steal) units of that currency directly, rather than produce something of value and trade for the currency. Thus, as the economy gets larger, more and more resources (both in human labor and energy) are spent getting money this way. All currencies will thus tend to have this kind of economic drag on them.
With gold, a fraction of output is devoted to mining more gold to use as money.
With paper fiat currencies, a fraction of output is devoted to couterfeiting or stealing the notes (including, of course, the arms race of countermeasures to stop this -- do you think the armored trucks and guards are free?)
Scrip currencies are usually too small for counterfeiting to get off the ground, but they must expend a token effort to make sure you can't just photocopy them.
And for bitcoin, a portion of the economy will be devoted to mining more coins and collecting transaction fees.
So it's true that Bitcoin comes coupled with a large overhead of energy spent on mining (or trojans to steal private keys), and it must continue to grow in order for a block chain solution to provide any kind of proof that a large fraction of existing mining capability was spent on it.
Just don't think other bigtime currencies are somehow more green.
Information theory is life. The rest is just the KL divergence.
The ad^Wpage views say otherwise.
The more users join, the more value the initial group owns.
No.
Actually, it still is. The money supply can only keep expanding as long as debt keeps increasing. Once everybody has taken on all the debt they can handle, the money supply will *have* to contract (which will be catastrophic to the economy), or the fed will have to issue money like mad to keep stringing it along (which will be catastrophic to the economy). The pyramid still eventually runs dry even if everyone's bought in.
So, how did the debt contract during the Clinton years?
It wasn't just a single compromised account. The number of bitcoins "sold" in the hack were more than any single account on mtgox contains. Also, the value only went down to 0.001 briefly, and was back up to $14+ within minutes. Not bad resilience for a worst-case sell-off.
I love going down to the elementary school, watching all the kids jump and shout, but they dont know I'm using blanks.
That's a very good point I hadn't fully considered. I suppose you could tether some sort of "legal ownership" to the particular computation you ran to generate your FooCoin, but that's a door I would very much so like to leave closed.
Support the EFF and Creative Commons. The war is coming, and they're supporting you...
widespread monetary systems, such as banks and credit card companies, also spend energy, arguably more than Bitcoin would.
I'm hardly a "environmentally minded individual", but this rationale kind of just bugs me. It's like saying "SUVs are great because they use less fuel than Semis do!"
Support the EFF and Creative Commons. The war is coming, and they're supporting you...
Ah, bitcoins. They're sort of like money, except no one uses them, and retailers won't accept them. A bit like deciding pebbles in your backyard are really money, and then going into shops demanding they accept them.
I've been mining bitcoins with servers. Servers that would normally be used to display websites. Instead of producing websites, they are producing bitcoins! Just for me! And it only costs me around $14,000 a month!
When I'm rich and you're not, we'll see who is laughing!!!
Everybody isn't playing. That's why you see high prices on Bitcoin as people scramble for anything else, gold and other precious metals of time proven value, other currencies and commodities and real estate. Those who keep their money in US dollar as savings are the ones gambling.
As long as you continue to believe what you do and spread the word then you can help keep prices low on things of actual value while the rest of us run like hell from debt leveraged fiat currencies.
Never go to sea with two chronometers; take one or three.
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So, while most comments so far seem to suggest that most of Slashdot doesn't want to hear about Bitcoin, I'm posting in the hopes that one or two people here actually understand how it works.
The network is imperfect in the sense that there is, at the moment, a one-to-one mapping between users and public-keys.
This strikes me as entirely fucking wrong. There is a one-to-many mapping here -- while one key belongs to one user, a user can (and should) have many keys.
Or is it that they're admitting that they make this assumption?
Also, this:
The presence of a Bitcoin mining pool (a large red vertex) and a number of public-keys between it and WikiLeaks' public-key is interesting.
Not really. I'd guess most Bitcoins now are originally mined in a mining pool. The number of public-keys between it and WikiLeaks may represent distribution between the mining pool and its users, or (more likely) actual transactions where the mining pool assigns coins to a miner, who trades with someone else, who trades with someone else, who donates to Wikileaks. Knowing which mining pool originally generated those coins doesn't really tell you much, does it?
It's possible I'm misreading this, though. The summary within the blog post is informative:
Bitcoin is not inherently anonymous. It may be possible to conduct transactions is such a way so as to obscure your identity, but, in many cases, users and their transactions can be identified.
But we sort of knew this. Bitcoin is not inherently anonymous. However, it is not particularly hard to be more anonymous than what this article suggests.
Don't thank God, thank a doctor!
Paraphrasing: "At the time of writing the total Bitcoin economy was worth $500,000."
Most penny-stock companies can puff-up $10M of market cap on less hot-air than Bitcoin promoters have expended.
The concept of a non centralized electronic form of money could effectively remove the ability of government and banks to tax people through the issue of debt & through inflation. it would remove the central authority and control authorizing and monitoring transactions.
At the moment, our money is issued as debt, you may not have thought about why that is the case, but it is quite deliberate.
So I am of the opinion that there are some very wealthy and powerful people paying Slashdot to disparage Bitcoin. They don't want even the idea to become popular never mind the particular implementation itself.
Otherwise, bitcoin is as you say completely irrelevant. Why would anyone bother?
Deleted
If you gave out proportionately more BTC as the number of users grow, the inflation would be insane.
Would that actually be a problem? If you buy bitcoins as/when you need them, inflation wouldn't bother you when using them. It would only prevent people from hoarding them - which, guess what, is a good thing.
So it's 500 BTC per hour, divided among everyone
Would that it were. But no, it's far worse than that, the amount given out per hour decays exponentially. Which is insane.
Why is it shocking to have to earn your currency?
It's not. It's shocking that early adapters don't have to. Why should I consider bitcoins worth my work, when other people got them for free?
I am trolling
The problem is, Bitcoin's value is continually growing (the number of bitcoins in the system is hard coded and fixed), and its exchange value is really based on speculation right now, so it's very volatile.
End result is paying any sort of bills becomes a strange form of gambling - you want to buy when it's low and sell high, while your merchant has to adjust prices quickly if they expect to get anything out of the deal (or you end up with "it's 1 bitcoin now, valid for the next 5 minutes" deals).
And the other problem with Bitcoin will happen once the speculators and other wall-street types move in. They haven't yet because the money isn't there yet...
Finally, I see this Bitcoin as basically the 21st century form of $cientology. It's value is held up purely because a bunch of techie people got together and decided to create it. It's highly possible someone might create Bitcoin 2.0 and see success - since there's nothing backing the original Bitcoin, the barrier to entry is low.
Satoshi and the other devs had absolutely nothing to gain in Bitcoin. If you think they are using it to generate cash you are probably incorrect.
Hm...funny how so many of the early adopters cashed out their Bitcoins and got a huge pay day.
Palm trees and 8
So instead you have a system designed to create insane levels of deflation, and to make the early adopters as rich as a ponzi scheme.
I'm out of my mind right now, but feel free to leave a message.....
CPUs that are overvolted and overclocked to the point of actually failing tend to make mistakes and BSOD pretty often. Are you sure they overclock them THAT heavily? They could merely overclock to around 4-4.5 ghz with Intel's stuff (assuming that is the architecture they used) safely.
Can you stop posting bitcoin articles already? Slashdot is the ONLY place I hear about it, and almost everyday there is some stupid story about them. At this point I'm guessing the editors own millions of these worthless things, and they are hoping to generate interest so hey can unload them on some sucker. The rest of the world doesn't care in the slightest about bitcoin, including your readers. Can we go back to stuff that matters now?
I'm not sure what your reply had to do with my post. However, I generally agree with you, except technically the part about, "the number of bitcoins in the system is hard coded and fixed". The bitcoin network can be forked by anyone with credibility. Credibility being highly subjective. Relative to the current bitcoin network a fork needs to have equal or better credibility to gain a better market share. But you alluded to that in your last sentence, "t's highly possible someone might create Bitcoin 2.0 and see success - since there's nothing backing the original Bitcoin, the barrier to entry is low."
Oh, don't get me wrong - the Bitcoin computing infrastructure would be significantly greater than the amount Visa needs. The estimates I've seen are that BTC would need a full rack worth of 2U servers to compete with Visa... Which I think isn't really that big a deal for pushing that much money around. The rape isn't paying for Visa's computers. Visa rapes you for *profit*.
If Bitcoin becomes widely used and it is run by roughly a rack worth of servers, then I will buy two racks of servers and corrupt the system to divert a shitload of money to me. Bitcoin is only possible if it uses more power than any single entity can realistically get, which is in fact quite a lot...
How would you structure the distribution of a fiat currency? Giving it out to the people running the network (miners are providing the processing to secure the transaction log) is a pretty decent way, I think. How would you do it differently? Who deserves the generated currency more?
I don't have a problem with the fact that people running the system get some money. I have a problem with the fact that people who created the system get a fucking lot of money. More than ten percent of the total amount of Bitcoins ever available is mined in the first year. That's just insane.
"the thief sent 0.31337 BTC to LulzSec"
Cute.
All that said, I'm not an investor, just someone who wants to see the BTC succeed for my own needs as someone who needs to send money internationally on a regular basis.
In other words, you're a terrorism supporter! Good-for-nothing national security undermining "currency" humbug! </troll>
Coffee-driven development.
The long term bitcoin supply is basically fixed so more bitcoin users means higher value per bitcoin which means more value owned by the initial group (assuming they kept their bitcoins rather than selling them off).
note: i'm known as plugwash most places but i screwd up registering that here somehow in the past and now can't register
Huh? When Barbara Steisand pushed the legal motion which made that meme, she was looking for privacy and instead found more public exposure. Do you think that detractors of Bitcoin fear exposure?
The force that blew the Big Bang continues to accelerate.
So... this is the year of the Bitcoin desktop?
Now you have to earn (or exchange earned money for) bitcoins. Why is it shocking to have to earn your currency?
Because it wasn't designed that way from the start. It was specifically designed so the "early adopters" (read: The creator and his friends) would be able to amass large amounts of the shit with very little effort, but then when others come in, now they have to "work" for their money.
In other words, they didn't have to "earn" it, so why should everyone else?
The rapid growth of people participating is making it much more valuable in that regard.
No, regular, government backed money is still more valuable. For one, I can actually buy things with my government backed money. To buy things with BitCoin, either I have to use Silk Road, which for the most part, only deals in drugs and other illegal and quasi-legal things, or I have to.... convert them to government backed currency.
enslaved squirrels on treadmills
Squirrels of the world unite! It's time to overthrow the treadmills and the bourgeoisie!
Physical mining actually takes work. In addition to actually finding the gold deposit, you have to go through the effort of extracting the material from the earth, which is no small task. Bitcoin "mining" involves running a program on your computer. That's it. No work whatsoever.
I think having a bunch of very "rich" early adopters with an undue amount of bitcoins is indeed a problem because it can cause market instabilities. However, it could be corrected: The Bitcoin system is a bookkeeping mechanism which keeps track of all "bitcoins" back to their creation through mining. Require transactions with bitcoins originating from the first year of mining to pay a minimum percentage as transaction fee, increasing with the time since the last transaction so that the value of those coins decays exponentially (say 20% per year). The transaction fees are fed into the mining process. That way 99% of the early bitcoins would be converted into normal bitcoins over the next 20 years. Likewise this principle could be used on all bitcoins (albeit with a much lower percentage) to counteract the builtin deflationary tendency of the Bitcoin system.
(Send your 2 cents to 16aUR2pLGURF35Ys6x6J1J73DagryzzQsd if you like this idea.)
If you think THIS is a scam, read up more on fractional-reserve banking. The debt-driven US dollar is the biggest ponzi scheme ever.
I fail to see how this is even remotely relevant, as the issue is that BitCoin is a pyramid scheme. The idea that others may or may not be has no bearing on that.
As long as you continue to believe what you do and spread the word then you can help keep prices low on things of actual value while the rest of us run like hell from debt leveraged fiat currencies.
"Keep prices low". As the price of gold is in one of the highest speculative bubbles in history.
The bitcoin network can be forked by anyone with credibility.
Yes, but then they wouldn't be "BitCoins". They'd be "ByteCoins" or something.
The rape isn't paying for Visa's computers. Visa rapes you for *profit*.
I've never been raped by Visa. In fact, Visa has helped me out. When my wallet was stolen, I didn't have any cash, just a few cards. Meaning that I just lost a couple pieces of plastic, and wasn't liable for any misuse of them.
Compare that to the guy who's BitCoin wallet was stolen; he lost everything.
You are who you hang out with.
Without them, you are a cipher. You are also irrelevant and, in the context of a network, you are nonexistent.
With them, named or pseudonymmed, you are you and your youness is its own significance.
Bitcoin is not anonymous; it is pseudonymous. Maintaining the uniqueness and validity of those pseudonyms is essential to its operation. It can therefore never be anonymous. Which is not to deny that you might as well be anonymous if nobody cares what you're doing with it. Cf. life in the big city, man.
That's not paraphrasing, that is misreading. The value of the compromised account was about half a million. There was not half a million USD worth of players looking to buy bitcoin on that particular exchange at that particular time. Not all bitcoins are for sale on MTGOX at any given time. There are other exchanges, and there are people who are not buying or selling their bitcoins. Right now, there are over 6.8 million bitcoins, but there are only about 100,000 up for sale.
If you are not allowed to question your government then the government has answered your question.
touché
Due to the (perceived?) imminent collapse of the Euro. Europe is teetering, wait until there is a real flight to safety and then gold will find it's true highs.
Never go to sea with two chronometers; take one or three.
It's called a bread pudding protocol.
It didn't. The debt increased year over year, in spite of the budget surplus.
cpus make mistakes??? this can't be right.
Wealth is the gift that keeps on giving.
The total economy would theoretically be worth the ~6 million coins in existence multiplied by $13 USD or $78 million. Penny stocks are not necessarily bad companies, just companies that trade for less than $1. Any company can be a penny stock if they issue enough shares.
Bitcoin isn't necessarily puffing itself up either. It's actually a very good idea. Whether this incarnation is a flash in the pan or not only time will tell, but cryptocurrency is a permanent thing now.
Never go to sea with two chronometers; take one or three.
And now a reading from American Gods by Neil Gaiman:
Chapter one. Shadow had done three years in prison. He was big enough and looked 'don't fuck with me' enough that his biggest problem was killing time. So he kept himself in shape and taught himself coin tricks. He thought a lot about how he loved his wife. The best thing in Shadow's opinion, perhaps the - please let's stop posting about Bitcoin. The best thing in Shadow's opinion, perhaps the only good thing about being in prison, was a feeling of relief. The feeling that he'd plunged as low as - please let's stop posting about Bitcoin. The feeling that he'd plunged as low - please let's stop posting about Bitcoin. The feeling that he'd plunged as low as he could plunge and he'd hit bottom. He didn't worry that the man would get him - please let's stop posting about Bitcoin. He did - please let's stop posting about Bitcoin...
Until they actually reveal the identity of someone, their conclusion is false.
I once took an excursion to Reddit, and later HN. Unlimited up/down voting sucks when dealing with a hive-mind.
For fuck's sake I think I've read about this supposed "early adopter bonus" two dozen times already so let me say it loud and clear:
EARLY ADOPTERS ARE NOT AT SIGNIFICANT ADVANTAGE.
I want people to understand that mining bitcoins was not easier at the beginning than it is now. In fact due to technological advances, bitcoin mining is easier nowadays.
BTC are basically worth a measure of computer cycles. If you invest the same amount of computer cycles you get the same amount of BTC. More actually thanks to revised algorithms.
An early adopter can be beaten by a late adopter if the late adopter invests more resources into the mesh than the early adopter. An early adopter using old hardware in his basement only during the night when the power bills are cheaper can be beaten by a late adopter using modern GPUs running fulltime in a week. In two weeks you will be twice as rich, in BTC, than him.
When you realise that mining for BTC costs real money it means that early adopters aren't really at an advantage. They have more BTC but less UDS, which places limits on them.
Now early adopters have been profiting from block checking, but that is no different than profiting from services in any other industry. Also I admit that early BTC buyers (not minners, buyers) do have early adopter advantages right now, since BTC are worth more today than early, but if the value of BTC drops so does their investment, they aren't at much of an advantage.
And of course, even that advantage is only relative to their total investment.
I'm sure someone with a more economics bent than me can come up other early adopter advantages I haven't considered, but in my technical opinion this is probably balanced with the late adopter advantages due to technological progress.
But... the future refused to change.
guess where English originated
In Germany and France? ~
No, regular, government backed money is still more valuable. For one, I can actually buy things with my government backed money. To buy things with BitCoin, either I have to use Silk Road, which for the most part, only deals in drugs and other illegal and quasi-legal things, or I have to.... convert them to government backed currency.
Wow, you are one misinformed motherfucker. But you go on believing that; I'll enjoy my pair of 6990's, ERM-2K3UCU, dental work (well, maybe I won't "enjoy it"), gift cards, products from Amazon and Newegg, laptop, Steam games, computer case, among many other things that I am using and have purchased with Bitcoins. I've never been to the Silk Road site.
BTC is far, far more convenient than Paypal. However, there is a drawback and that is lack of an escrow/accountability device for sending BTC... but if you're dealing with a company, the worry is far less and I'd much rather use BTC to pay for online services than provide my credit card, much less have to go through PP.
So... in short, please buy a clue (either with your government back currency or BTC) before typing on your little keyboard.
The total economy would theoretically be worth the ~6 million coins in existence multiplied by $13 USD or $78 million. Penny stocks are not necessarily bad companies, just companies that trade for less than $1. Any company can be a penny stock if they issue enough shares.
Bitcoin isn't necessarily puffing itself up either. It's actually a very good idea. Whether this incarnation is a flash in the pan or not only time will tell, but cryptocurrency is a permanent thing now.
Thanks for the additional info, and, I suppose you could call $80M a somewhat significant phenomenon. My point about penny stocks was more directed at the fact that a great many of them are in some way a shell of their former self, most of them have lost a great deal of value to arrive at share prices in the 0.01 to 0.30 range. I worked for a penny stock company for 10+ years, we were a good company, delivering best-in-world products for our market - nonetheless, it was a small outfit, never more than 20 employees, and when it's value did occasionally pop up around the $80M mark, it was mostly due to hype (not internally generated or encouraged by the company, more like amusedly observed from a distance...)
One need look no further than the pets.com era of the first internet bubble to find valuations much higher than $80M for ideas that clearly were not worth much more than the napkin they were sketched on.
Not that I have any stake in this game, but didn't early adopters run a greater risk that their investment would be useless?
In the end, the only thing that matters is whether it is adopted by critical mass or not, and/or accepted by governments. Much like standards :) You could even start your own bitcoin2, using whatever rules you think are fair, and try to get people interested.
Religion is regarded by the common people as true, by the wise as false, and by rulers as useful.
Not really. He is claiming that bitcoin uses less power than current state-of-the-art would.
Religion is regarded by the common people as true, by the wise as false, and by rulers as useful.
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or not. It's a gamble. And that's life. Wherever you invest, there is a chance of misfortune. Personally, I think the Euro will survive, but who knows? It rather depends on the socialists being able to restrain themselves a bit in the coming years.
Religion is regarded by the common people as true, by the wise as false, and by rulers as useful.
Actually no. I'd like more important debates, like about the U.S. debt ceiling, the Oslo bombings or Lulzsec activities.
Umm, with the exception of the latter, why don't you go read CNN.com or something? If I wanted to read about the US deb ceiling or the Oslo bombings, Slashdot is not exactly the place I'd think of first. I'd have to be pretty stupid to expect those kinds of stories to appear on a tech news site.
And how does that make any different at all?
The early arrivals get gold much cheaper than the later arrivals, which apparently was the only criteria for almost being a pyramid or ponzi scheme. That they get it for some cost that isn't zero makes no difference at all. That it takes more effort to pick a gold nugget off the ground than run a computer program makes no difference at all.
#1, a lot of them were mined on a whim, but people can't be bothered to actually set themselves up to move them; or #2, a lot of them were mined on a whim, and then the wallets lost and discarded when people lost interest.
Or #3, a lot of them were mined on a whim, only to fall victim to the dreaded BSOD...or perhaps a faulty DeathStar gobbled them up...
I don't know, I'm just not that comfortable with a wealth system that depends on the reliability of my home system. I back up everything, often, and still sometimes lose data on crashes*. Unless you're backing up your wallet to off site media every day, it could easily go *poof*.
*(Mind you, it doesn't help that the power system in our neighborhood is, to put it politely, crap. We do have all of our electronics on consumer-grade UPS's and surge protectors, but stuff still flakes out on us fairly regularly.)
"I love animals! Some are cute, others are tasty, what's not to like?" - Betsy Schroeder, Jeopardy contestant
Huh? I never understood why people were upset with banking, or why people always refer to the banking they dislike as "fractional reserve". If you think banks should loan money, and banks should take deposits (what I would consider the minimum for something to be defined as a bank) then all fractional reserve banking does is place restrictions upon that. And if you don't think that's a good idea, surely person A can loan money to person B. And person A can pay person C to figure out which applicant (B, B', B'') should get a load at what rate (given the likelihood of paying it back) and deal with all the paperwork on his behalf. Is the problem when person C offers insurance by selling pieces of loans to many people that you have a problem?
Now, you can state that those people C have been horribly negligent in their duties from like 2005-2009, and I would agree.
Your ad here. Ask me how!
Citation needed, otherwise you're full of shit. Almost none of what you listed takes BitCoin natively; you have to convert to USD or other Government Backed currency before buying those services.
Not really, because they didn't risk anything. They ran a program on their computer. There's no actual risk involved.
Except pyramid schemes don't come with full explanations and total transparency (hell, it's OSS) about the process.
To be a scheme, there has to be deceit. There's no such thing here. It's pure gambling, not more of a scam than the lottery or blackjack.
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A pyramid scheme, like any other scam, requires deceit. Bitcoin is fully transparent, hence it's not a scam, just gambling. It's no different than the lottery or similar games.
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You don't have to back up your wallet that often. The wallet doesn't contain your actual bitcoins; it's just a public/private key pair. The coins are publicly sent to your public key, and the transaction is recorded by all bitcoin nodes. The private key is how you prove you own them, which lets you spend them. You just need to back up the keys once, and then you're safe for all future transactions with that key pair.
People often generate new keypairs for each person they do business with, or sometimes for each new transaction, to better protect their identity. If you do this you need to back up the new key pairs, of course. The bitcoin client does something clever: it pre-generates the next 100 key pairs and stores them for future use. Thus, you only need to back up your wallet once for every hundred keys you give out.
It's actually much more insidious than that. With fractional reserve banking, you can actually have substantially more money out on loans than you ever originally had in cash deposits. With the 10.3% reserve in the US, you can have nearly a million dollars generated in loans from $100k in deposits. That sounds insane (and I agree), but it's deeply rooted in how banks originated.
Here's a good introduction to how it works and the history of how it got to be this way:
http://video.google.com/videoplay?docid=-2550156453790090544
I'm talking about private debt, not the federal debt.
An introduction to how this works:
http://video.google.com/videoplay?docid=-2550156453790090544
https://secure.wikimedia.org/wikipedia/en/wiki/Money_multiplier
My point is that people are very dismissive of BitCoin often because it's an unbacked currency, and because it's generated out of thin air... But USD is actually generated in much larger percentages out of thin air, and in a much less controlled manner than BTC. The insanity of the debt-generated dollar is an interesting subject in itself, but the relevant point is that people's objections to the BTC, while valid, are even more applicable to the USD, the most universally-recognized and trusted currency in the world. It's an attempt to show the BTC in perspective.
From what I've seen, some sold out a while ago, others held the coins and sold at a higher value, and so on; there was a speculative bubble. (I'm actually rooting for the exchange rate to go down; I think it's considerably overvalued based on current demand.)
I have not seen any evidence that any early adopters have attempted to pump and dump. Honestly, they couldn't - with the current market depth (very shallow), there's no way you can trade a large quantity of BTC into USD. You could buy the entire mtgox order book for about BTC$35k.
Do you have any evidence that such a pump and dump has occurred?
It's a problem. Right now, the currency has to be stable enough to trade $USD to BTC, buy things in BTC, and then trade BTC back to $USD, without a large fluctuation in value. If mining gave exponentially increasing money supply, the exchange rate would be spiraling down insanely fast.
In the future it would be even better if the BTC was a reasonably stable value store (like the dollar) so that you could simply receive and then spend BTC directly instead of as a proxy for USD.
No one got them for free. When the early miners got them, they were worth very little - the USD$ net-present-value returned per watt invested isn't terribly less now than in the beginning.
The very high returns are from taking the risk of holding onto the asset hoping it'd appreciate. That part is just like buying a penny stock and hoping the company pulls through the crisis. In both cases, it was very likely that they'd lose what they were continuing to hold. Would you consider an investor who bought into a penny stock to be getting that money for free? I say they earned it through accepting risk - the same risk that people who bought or mined into BTC at $35 were taking, and are now losing on. Continuing to hold it is holding onto a risky investment - it's like if your $1000 investment in a penny stock is now worth $1/shrare = $100,000, but you want to keep holding it, hoping for $10/share.
All that said, I've said several times in this thread that I think the BTC is in a speculative bubble. The current economic demand doesn't justify the price - it's driven by speculators who are either naive (geeks who've never owned a stock and experienced an asset bubble), or optimistic (if BTC continues to gain acceptance as a legitimate currency, the demand will rise).
Personally, my business is in the making and selling of actual goods and services, and I don't have the spare time and capital for speculative investments. I don't hold any significant amount of BTC (I have less than BTC$2 in my wallet right now), so I have no personal stake in whether it goes up or down... But I'm rooting for down, because I *do* have an interest in the BTC being *stable*, and I think it'll be much more stable when the speculators are washed out of the market and pricing is back in control of the people trading for present value.
You're correct - the bitcoin infrastructure will have to scale up considerably beyond that couple racks. My example was poor - I was describing transaction processing, whereas the whole infrastructure has to be considerably larger to provide security.
Still, I think that it's hard to foresee it ever being profitable to try to subvert the system. The only thing the exploit would allow is to revert very recent (within the last block or two) transactions. Everyone requires several rounds of confirmations for any nontrivial transaction. Thus, the exploit is: get an amazingly powerful cluster; transfer someone a large value of BTC; have them give you whatever you're getting in return without waiting for the transaction to be confirmed; then have your amazingly powerful cluster revert the BTC transaction. Basically no one is ever going to be performing transactions like that that are large enough to justify that much investment in computing power and energy.
If I'm wrong on that, then we'll need to rethink some things. :)
Actually, I think that's an excellent idea. Have you brought this idea up on any of the BTC forums?
(For anyone not aware, this is basically how transaction fees already work; this would just require raising the minimum transaction fees on old money.)
OK, rape is hyperbole. :)
I'm referring to the Visa transaction fees. You as a customer don't see them, but they're very real for the merchant.
Absolutely, you're right that the centralized model has advantages - but the no-chargebacks, works-like-cash-even-when-stolen model has a very real place as well. Right now I have to do that with wire transfers which are cumbersome, slow, and quite expensive. I've had $3000 tied up for the last two weeks due to a bank error on an international wire, and even after it gets sorted out they'll still charge me $50 for the service once you include the fees on the receiving side. But even that is cheaper than what Visa would charge, which is one of the reasons that my vendors don't take credit.
As for the guy who had near USD$500k in his bitcoin wallet... Well, all I can say is it's like cash. If you have that much, you ought to keep it in a secure place. I'd personally use an offline wallet stored in a secure location - quite possibly in a safe deposit box at my bank.
Have you brought this idea up on any of the BTC forums?
No, I haven't (no anonymous posting). Feel free to take the idea and run with it. It's probably too late to make a fundamental change like that though.
I'm curious why you can't just post under a pseudonym, but I suppose you can't answer that. :)
The changes wouldn't be impossible. There was some adjustment of the transaction fees just recently, actually - mostly to lower the minimum fee due to the decreasing transaction size that's come with the value growth. The advantages are significant: it could entirely fix the problem of deflation, and that might be a strong enough argument to gain widespread acceptance.
Having given it some thought, I'm not sure how it would work. How do you determine which coins are "old money"? It's easy enough to spot ones that were mined and then shelved, but I'm not sure how you could stop people from mixing their idle coins around between accounts to make them appear like they're in active circulation. I'm curious if you have any other thoughts on that.
I'm talking about private debt, not the federal debt.
An introduction to how this works:
http://video.google.com/videoplay?docid=-2550156453790090544
https://secure.wikimedia.org/wikipedia/en/wiki/Money_multiplier
I think everybody has their own quasi-religious convictions about "how this works" - my personal spin is that private wealth outweighs government wealth by a large factor (on the order of 10:1), and whether intentionally, or by their whim, private money decides the fate of the economy the rest of us live in far more dramatically than the Fed or any other governmental controls.
I always felt that .com bubble #1 was a dramatic example of what happens when the rich get excited about something - the Dubai construction boom is probably another good example. Of course, at some point, the euphoria wears off and the conservative rich pull back in a power-play, giving those who pulled back first a leg-up in the next round.
I also feel that life is too short to worry much about how all that "really works" and what I might personally do about it, there's enough smoke, mirrors, indirection, and personal caprice built into the power structure that you might as well just identify how the gross contours of the current economic landscape affect your life and go with it. By the time you've completed a root cause analysis, you will have expended a lot of resources that could have better been used enjoying your life and/or improving the life of your children.
Nothing serious, I just don't like keeping accounts for forums.
It is true that bitcoins get mixed with other bitcoins. A transaction typically consists of multiple inputs, one or more outputs for the recipient(s), one output for change back to the sender and optionally one implicit output for the transaction fee. The value of the original bitcoin(s) vanishes into these outputs. Any attached "devaluation rate" would have to be mixed as well. Let's say you're paying with an old never-been-spent 20 and a recently mined 20, the recipient gets 30, you get the change and the miner of the block with this transaction gets the fee. The old 20 was mined one and a half years ago and has never been spent, so its last transaction was 2 years ago. Devaluation of that 20 is thus 1-0.8^1.5=28.4%. The new 20 has no attached devaluation. All in all this means the minimum fee for this transaction is 5.689. Since there's no way to tell which is the recipient account and which account gets the change, the outputs have to be treated symmetrically. The sender effectively pays with 20-5.689=14.311 old bitcoins and 20 new bitcoins, so the recipient gets 14.311*(30/34.311) old bitcoins and 20*(30/34.311) new bitcoins. The change is 14.311*(4.311/34.311) old bitcoins and 20*(4.311/34.311) new bitcoins. Each output gets 100*14.311/34.311 percent of its value in old bitcoins and the rest in new bitcoins. The fee is turned into new bitcoins at the time of mining, so it is not affected by the devaluation, which is the goal, because the mining of this block took considerable effort (unlike the original mining of the old 20). The amount of old bitcoins in circulation is thus reduced by 5.689.
No additional attributes have to be communicated to make this calculation because all transactions are stored in the block chain and anyone can redo this calculation from the start.
If this looks complicated, it's only because there are coins with different devaluation rates. In case of a homogeneous "inflation", the calculation is a little simpler and the result is always coins with the same devaluation rate. I still think that treating very early coins differently is worth the effort, because it would eliminate one major criticism towards the system over the next few years.
The homogeneous devaluation would not only somewhat counteract the deflationary tendency, it would also provide a reasonable model for ensuring that the mining efforts aren't reduced and the validity of the block chain remains secure, by allocating the "lost" value to the miners.
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Well, let's state a 10% reserve, and simply state that 100k in initial deposits will eventually cause 1M to be loaned out. Further, for the sake of numbers, let's pretend both loan and savings interest rates are 0%.
To start with the bank owes 100k to people, and has 100k in cash. After the numerous cycles of the bank loaning money to someone, that person spending it, and the recipient depositing money back in the bank, the bank owes 1M to people, has 100k in cash and is owed 0.9M by other people (possibly some people both owe money and are owed money... they may have a mortgage and a checking account.) So, the bank expects that that 100k will allow them to pay anyone who wants cash relatively soon, and the payments on the loans will allow them to pay people in the future.
Note that the same effect can happen when people are willing to accept IOUs for money, just the bank essentially provides insurance (if one person cannot pay, the losses are spread throughout everyone, and the bank builds some expectation of deadbeatness into its interest rates), and liquidity (I can expect to withdraw any amount of money I want, so long as not too everyone wants all their money at once.)
Since I'm sure you have no objection to the cobbler giving me a pair of shoes for $10 next week, where in the amalgamation does the principle break down.
But here's an important rub. That 100k to 1M is determined by the reserve level. The legislation that introduced a "fractional reserve" was operating against a status quo... and in that status quo the "fractional reserve" was 0% (unlimited) not 100%.
Your ad here. Ask me how!
The links I posted are not "quasi-religious convictions", or economic theories. They are explaining cold, hard facts - codified in law, the simple mechanics of how the system works. Specifically: commercial banks don't just store and lend currency; they create it. Every time a loan is generated more currency - actual money in circulation - comes into existence.
But you think: commercial banks can't just spontaneously create money, right? That's what the central banks do! Most people don't understand how this works, and are even dismissive of the idea as some crackpot theory, since it sounds absurd at first. As I said, this is not a theory, and it's not some shadowy secret; it's the fully legal, in-the-open, way that the majority of USD$ is created.
Oh, I understand how that all works. I'm not saying that I have a problem with the mandated minimum fractional reserve; clearly we'd have bank failures left and right without it.
Here's my concern: as new debt is created, the currency pool grows, which causes inflation. If debt is reduced, we will experience deflation. With the low required reserve, a very large majority of the money supply is subject to this effect.
For economic growth, we need inflation to be somewhere from zero to slightly positive. To achieve that when most currency is debt-based, we have to keep increasing consumer debt. And indeed, we have, ever since the Great Depression:
http://dailybail.com/storage/chart%20debt%20to%20gdp.png
So what happens when we've taken on all the debt we possibly can? Either the banks end up owning everything, or we have to pay it down; either way we end up with deflation and the economy tanks.
Yes, that method makes sense, but that's not what I'm concerned about. Sorry, I asked my question poorly.
Two scenarios:
Miner1 earns 50BTC in Block 5. He then takes that 50BTC and sends it to a new account every few days. He'll rack up perhaps 1BTC of fees along the way. Today, he cashes out on an exchange. The coin is only a few days old, even though it's always been in his possession.
Miner2 earns 50BTC in Block 6. A few days later he spends it to buy a paper clip. The recipient then spends it to buy a rubber band. And so on, until today, when the final recipient cashes out on an exchange. The coin is only a few days old, having been spent many times.
Miner1 is the one we want to tax, not the last guy who was holding Miner2's coin at end. How do we tell the difference?
We don't tell the difference. The early coins would keep devaluing at 20% per year until they're completely converted into new bitcoins through fees and mining. The person holding them doesn't make a difference. This may seem unfair, but the overabundance of early bitcoins (relative to the number of people who are around to receive them) means that it was and is easy to get them, which is the same "mistake" as the early miners getting too many coins for too little work. If you have bitcoins that were mined early (by you or someone else), that part of your bitcoins would devalue quickly, prompting you to spend them, which distributes their value to the market at large. This is the desired effect. Recipients would probably want to post a conversion factor so that someone paying with old bitcoins pays more than someone paying with new bitcoins. This change would make old bitcoins unsuitable for anyone if saving is the objective, but then again preventing the accumulation of easy money is the point. New bitcoins, which are distributed more evenly from the start, need not be treated as harshly.
In a sense this would treat old bitcoins like a separate highly inflationary currency that becomes irrelevant over the next 20 years. To quench the criticism that early adopters are using Bitcoin as a get-rich-quick scheme, they have to lose their riches somehow. This is the fairest way I can think of that doesn't involve a restart. I believe I already said that it won't pass.
Specifically: commercial banks don't just store and lend currency; they create it. Every time a loan is generated more currency - actual money in circulation - comes into existence.
But you think: commercial banks can't just spontaneously create money, right? That's what the central banks do!
Well, yes, that's the simple side of the story. What matters is not how much currency exists, but how much of it is "currently" in circulation. Providing a loan from cash on deposit is one way to put cash back into circulation, printing more of it (and spending it on Government contracts) is another. Handing every schmo on the street an extra $20 next Friday is also a good way to put an extra $5B into circulation real fast.
Where the story gets interesting is when players who have so much wealth they can't access it all at once without destroying much of it, start to move pieces of their wealth - for example, if the Saudi Royal family decides they want to buy, oh, maybe Key West, for example. At current market valuations, they have the cash, but dumping that many dollars into circulation all at once will have a noticeable devaluation effect on the dollar - not to mention driving up the price of the slower moving pieces of real-estate to astronomical proportions. On the flip-side, there are individuals who hold huge amounts of real-estate, significant chunks of multi-billion dollar companies, etc. and if these people want to liquidate their holdings and turn them to dollars all at once, the market value of their holdings will plummet - and if many of these people try to liquidate all at once, it can screw up the economy for everyone else... as has happened recently.
Third world countries have periodically invalidated their currency, mostly to get a handle on the people who have amassed too much of it. It will be interesting to see if the "first world" is pushed into a similar maneuver, I look to Japan as a model for what is probably coming in the West over the next 10 years, a sort of happy stagnation - at least I hope the West manages that soft of a landing.
Citation needed, otherwise you're full of shit. Almost none of what you listed takes BitCoin natively; you have to convert to USD or other Government Backed currency before buying those services.
You are a lying sack of shit
Everything I listed in my original post was purchased with BTC natively. Some of the links listed above are native, some are gift cards, which, as far as I know, no corporation has (yet) been able to get their gift cards backed by the government.
The quoted post said the only way to spend BTC was to buy illegal things on Silk Road (completely false) or convert to Government Backed Currency (also completely false).
So please, stop lying and spreading misinformation. If you are really just ignorant instead of a lying sack of shit, then please stop posting until you get even a modicum of accurate information.
If mining gave exponentially increasing money supply, the exchange rate would be spiraling down insanely fast.
2% a year inflation is exponential; the dollar is still doing OK. Remember bitcoin mining is ultimately limited by computing power, which approximately doubles every 18 months, which works out a shade below 1% per week. That's high by the standards of traditional currencies, but it's not absurd, and I don't think it'd be enough to make the currency unusable.
In the future it would be even better if the BTC was a reasonably stable value store (like the dollar) so that you could simply receive and then spend BTC directly instead of as a proxy for USD.
Yes and no. People holding a currency long-term is bad for everyone; savings are better off kept in stocks or assets. And it's not like the current mining-payout algorithm has kept the price stable.
No one got them for free. When the early miners got them, they were worth very little - the USD$ net-present-value returned per watt invested isn't terribly less now than in the beginning.
People probably sold them for what they cost them to make, so that's not surprising. But to say that someone's watt two years ago is worth thousands of times what my watt is now doesn't add up.
The very high returns are from taking the risk of holding onto the asset hoping it'd appreciate. That part is just like buying a penny stock and hoping the company pulls through the crisis. In both cases, it was very likely that they'd lose what they were continuing to hold. Would you consider an investor who bought into a penny stock to be getting that money for free?
Someone who gets a penny stock buys it from someone else, on an open market. The early adopters of bitcoin are far more analogous to the issuers of a new currency - they've created a bunch of tokens and declared they're worth something. And back when private banks issued their own currencies, customers would insist that those banks held proportionate reserves of hard assets that they could claim from if need be. That's what's missing from bitcoins.
I am trolling
Unfortunately that would make the BTC non-fungible. That's a very poor attribute in a currency. I doubt it would be possible to get the network to accept that change. It might be possible to have a one-time step-devaluation of the early coins, but that would still screw a lot of people who just happened to be holding them.
It's an ugly problem, and my gut instinct is that even if it's making some people rich, the need for such a currency outweighs my sense of injustice at some people getting too much easy money.
Thanks for your thoughts, though. I'll keep turning them over for a while. :)
True, "exponential" is not the real problem. The problem is the rate. While computing power is the ultimate limit, right now the network growth is driven by increasing interest and adoption, and to a lesser degree, the ability of AMD to ship 6990s. The processing growth has averaged about 1000% yearly for the last year and a half. The actual inflation would be a bit less since it'd be diluted into the pool of coins from the last couple years, but you're still looking at 800% or so. That will continue as long as the BTC's reach is growing.
Yes and no. People holding a currency long-term is bad for everyone; savings are better off kept in stocks or assets. And it's not like the current mining-payout algorithm has kept the price stable.
I agree with both points. I'm not opposed to inflation; just hyperinflation.
People probably sold them for what they cost them to make, so that's not surprising. But to say that someone's watt two years ago is worth thousands of times what my watt is now doesn't add up.
Again, you have to compare the value of the asset at the time of acquisition, not the value gains since acquisition. Is it fair that someone's penny stock from two years ago is worth thousands of times what you can afford to buy in the no-longer-penny-stock today?
Someone who gets a penny stock buys it from someone else, on an open market.
And someone who held onto the BTC a year ago chose not to sell it to someone else, on an open market. As such, they effectively paid the fair market value in opportunity cost, IE, by choosing to not have those few dollars in their pocket, the same as you chose to keep a few dollars in your pocket rather than buy some bitcoins.
The early adopters of bitcoin are far more analogous to the issuers of a new currency - they've created a bunch of tokens and declared they're worth something. And back when private banks issued their own currencies, customers would insist that those banks held proportionate reserves of hard assets that they could claim from if need be. That's what's missing from bitcoins.
Mmmm, you're conflating two things there. One is the issuance of the currency, and the other is the backing of the currency.
When private banks issued currency, they weren't giving it away for free. It was in exchange for some other asset (gold being typical). And a little secret for you: even in antiquity, gold backed currency was not backed 1:1. But that's a whole 'nother subject. :)
The early adopters didn't spontaneously create 3M BTC, divide it among themselves, and then begin trading. It was always available to everyone to mine and/or buy. They just got there early. You could have been there too; so could I; we weren't.
Now, that said, I agree that to a degree, the early adopters were able to unfairly capitalize on their knowledge of the currency before it was widely publicized. The question is how much that is, and whether it's worth undermining the faith in the currency by using inflation to revoke a significant percentage of their wealth.
If you buy in now and two years from now it's trading at USD$1000, should your share be inflated down to compensate?
The non-fungibility is a problem. That's why I keep making the distinction between "old bitcoins" and "new bitcoins". They're not the same and can't be substituted for each other. Since everybody can tell them apart though, I don't think it's as big of a problem as if bitcoins were generally non-fungible. Furthermore this problem replaces another problem which I believe to be far worse, and the design is such that this new problem is gradually eliminated, unlike the problem of having very rich early adopters, which gets worse with deflation.
The processing growth has averaged about 1000% yearly for the last year and a half. The actual inflation would be a bit less since it'd be diluted into the pool of coins from the last couple years, but you're still looking at 800% or so. That will continue as long as the BTC's reach is growing.
I would expect the coin's value to grow with the number of users though, which will balance this out. Surely price will be more dependent on number of bitcoins/user than on absolute number of bitcoins - every user "needs" the same number of coins, however many users there are.
If you buy in now and two years from now it's trading at USD$1000, should your share be inflated down to compensate?
Yes. Or rather, the reward algorithm should be such that the value people can get from mining is the same whenever they got in. I think bitcoin has done a lot of good in pioneering the concepts and the crypto, but it'll be a variant without the exponential decrease in available mining that ultimately sees large-scale adoption.
I am trolling
I've given it some thought, and I think you're right: inflation to match the growth sounds like a good policy. I'm trying to think through all the unintended consequences, and I'm not certain that the flat-difficulty mining is the best way to implement it, but I think the principle is sound. I'm also worried about what happens if the BTC economy shrinks: how do we implement the reciprocal deflation?
Currently I'm in favor of adjusting the current BTC system, rather than a complete reboot. It's a high bar to do so since it has to be accepted by the majority of the network, and there are high costs for doing so (people will balk if the rules for their currency can be changed on a whim - then again the same objection applies to any fiat currency), but I think it's possible to do if a very strong economic case can be made.
I'm also worried about what happens if the BTC economy shrinks: how do we implement the reciprocal deflation?
With luck, people who abandon bitcoin will abandon their coins too. But if they sell them I can see this being an issue. Hmm.
Currently I'm in favor of adjusting the current BTC system, rather than a complete reboot. It's a high bar to do so since it has to be accepted by the majority of the network, and there are high costs for doing so (people will balk if the rules for their currency can be changed on a whim - then again the same objection applies to any fiat currency), but I think it's possible to do if a very strong economic case can be made.
Fair enough. Hopefully the rate or not of adoption of the current system will eventually be persuasive. But I can see some value in competition; with good management software, if there were five or so bitcoin-like systems running in parallel maybe it'd allow more experimentation to find optimal economic policies. Or not.
I am trolling