Will Legitimacy Spoil Bitcoin?

New submitter F9rDT3ZE writes "Salon writer Andrew Leonard examines the U.S. Treasury's Financial Crimes Enforcement Network's (FinCEN) first 'guidance' regarding 'de-centralized virtual currencies,' noting that Bitcoin's supporters call it a 'currency of resistance,' while others suggest that 'the more popular Bitcoin gets, whether as a symbol of resistance or a perceived safe haven in financially troubled times, the more government attention it will inevitably draw, and the more inexorably it will be sucked into existing regulatory structures.'"

Comments

That's the price you pay

[allaunjsilverfox2]

No matter what you trade, if it has value, the state will look to control it's function.

Re:That's the price you pay

[shaitand]

"You have a bitcoin. Great! Now how do you know that it's unique? The transaction was signed? Fine. But how do you know that it was legit before you received it?

No matter how you slice it, there must be a central authority to indicate which are real, and which are false. A hack there can cause all flavors of theft, fraud, and forgery. If you have no central authority, then you risk fracturing your money supply at the exchange level, with each exchange becoming its own authority."

Having come up with a decentralized P2P solution to this problem is the reason people are so excited about this Bitcoin thing. ;)

Every piece of every Bitcoin ever to exist has a transaction trail from it's point of origin to the current address at which it resides. Verifying these trails is what miners do. It isn't simply that you send me some bitcoin and I trust it or I trust the hash. You send me Bitcoin and the network begins validating the transaction from the point it was mined to you to me over and over again with it eventually becoming part of that trail.

In order to have even the tiniest minute fraction of fake Bitcoin you'd have control >51% of all the mining power. The more people mining, the harder that feat is to accomplish. The Bitcoin network can determine if someone actually has >51% btw.

Re:That's the price you pay

[shaitand]

Party B would never need to sue Party A. The network would reject the fake transaction and it would never become part of the publicly viewable audit log. If you present the relevant address any judge could verify a transaction or lack of one along with anyone else who cared to.

The anonymity that people talk about with Bitcoin comes from the fact that there is nothing to indicate who any particular address is controlled by. The actual flows of coins between the addresses are all public record. That is why people use coin tumblers. With a coin tumbler you can get Bitcoin back out that is unrelated to the coin you put in. Even then, large transactions and conspicuous sums can be used for forensic accounting.

Re:That's the price you pay

[demonlapin]

This is one of the central insights of a book entitled Seeing Like a State, basically that all sorts of disastrous policies have been implemented not because they were likely to be successful at solving some particular problem (e.g., Stalinist collectivization of agriculture gave peasants a certain area of land, regardless of its quality, rather than the traditional division of best-medium-poor lands in roughly equal quantities to each family in a village even though this made it almost impossible for an outsider to identify who owned what) but because they made people's actions more visible to the state and thus more controllable (and more easily taxed).

Re:That's the price you pay

[vux984]

Same applies to VISA transactions. But nobody would ever commit 10^5 visa micro-transactions a day either for the same reason. Transaction fees would make it utterly pointless and counter productive. You'd inevitably switch to some sort of internal coins/points system for the majority of transaction and transact with VISA once a month or so.

Even iTunes already witholds processing puchases as they happen, and aggregates a day or two worth all at once to minimize their fees.

 

Legitimacy

[Grashnak]

I can't question its legitimacy until I see some evidence that it has any.

Re:Transactional Currency, not Safe Haven Storage

[Anonymous Coward]

You have a PROFOUND ignorance of economics, governance and politics.
Or, you've been steeped in the Fox Network view of the world.

Re:Quantum computing and bitcoins?

[Kal Zekdor]

The difficulty of mining bitcoins (and hence the speed that a given set of hardware mines bitcoins) is directly proportional to the amount of computing power mining bitcoins. If the amount of computational power in the system goes up, that means that (in the short term), the amount of bitcoins mined in a given period goes up. Every X number (I forget exactly how many) of blocks (the basic structure of bitcoin as a currency, currently each block "creates" 25 BTC, given to the block's solver. The amount of BTC earned per block is halved at distinct intervals, but that's not relevant here.), the bitcoin system (i.e., each client that is creating these blocks, as there is no central server) analyzes the length of time it took solve all X blocks. If that time is less than Y (again, don't recall the exact number, but I think it was a week), then the difficulty of mining blocks is increased by a proportional amount. If it was greater than Y, the difficulty is decreased.

What this all means is that if someone were to bring an astronomical amount of computing power to bear on mining bitcoins, the difficulty of mining bitcoins would automatically compensate, and the addition of new bitcoins into the marketplace would proceed at the same rate. Granted, the person at the head of all this computing power would be the recipient of most new bitcoins, but the currency would not be destabilized (at least through computing power alone.) There would be other things said person could do to destabilize bitcoins, though, through either Financial or Technical means. They could hoard all BTC they mine, causing the price of BTC to rise. They could sell BTC they mine at ridiculously low prices, causing the price of BTC to plummet. If they comprise more than 60% or so of all computing directed at bitcoin mining, they could hijack the blockchain, and would be able to spend bitcoins they don't own, or double spend their own bitcoins.

I'm fairly sure that anyone who attempts to hijack bitcoins through raw computing power would end up spending more on said computing power than they would earn from bitcoins. So unless a malicious billionaire or an intrepid hacker organization with a few supercomputers in their botnet decide one day that they really don't like bitcoins, it doesn't seem likely to happen.

Re:bitcoin's value is for it's utopian idealizatio

[circletimessquare]

i'm not entirely sure when faced with the same mental vomit over and over again why it is my responsibility to find a new creative path to sanity for the crackpot. it is the crackpot's responsibility to make fucking sense