Slashdot Mirror
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.
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.
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.
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.
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.
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.
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.
The debt-driven US dollar is the biggest ponzi scheme ever.
It's not a ponzi scheme if EVERYBODY plays.
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
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.
Comment removed based on user account deletion
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.
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.
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.
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.
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.
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.
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
And it astonishes me how full of shit most BitCoin supporters are. "Oil producing nations would not accept dollars unless we held a gun to their heads." Really? You're gonna resort to some stupid, conspiratorial, anti-government rhetoric? Is it not possible that they want our dollars, as they are accepted in many places around the world, through FREE CHOICE of those peoples? No, of course not. The only reason anyone would accept US Dollars is because they were forced to.
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.
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.
This is false. The difficulty of the problem is adjusted by consensus such that there is, on average, one solution found every ten minutes—no matter how much total computation goes into finding that solution. Each solution is (currently) worth 50 BTC, plus any fees paid for the transactions included in the block. How much of that ~300 BTC/hr. you are likely to get over the long term is a function of the ratio between your mining capacity and that of the overall network. Early on there was much less competition, so the reward for a given amount of transaction-confirmation (mining) was much higher than it is today.
This is not to say that early adopters have an unfair advantage; they simply took a chance on an unproven, experimental, emerging technology and have been reasonably compensated for helping to make it a success.
"The state is that great fiction by which everyone tries to live at the expense of everyone else." - Bastiat
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.
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.
Dilbert RSS feed
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.
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.
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. :)
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.