Last Forking Warning For Bitcoin

ASDFnz writes "It has been just over two months since the bitcoin block chain was rocked by a near disastrous fork causing the bitcoin price to crash. The culprit of the crash was found to be a bug that prevented pre version 7.1 bitcoin clients accepting large blocks that could be generated by version 8 clients. A temporary fix was put into place by Bitcoin Project lead developer Gavin Andresen that forced version 8 clients to generate blocks that version 7.1 could understand. It is important to note though, the fix was a temporary one! In just under two days on the 15th of May the fix will expire and version 8 clients will once again be able to make large blocks that older clients will not be able to understand."

Comments

Crap, the sky is falling

[roman_mir]

Oh shit, the sky is falling.

Total disaster, never happens in real world, not virtual one. Except for all the times when 'real world' currencies undergo devaluations, revaluations, forced exchanges, just plain old inflation, all the things that lead to currencies collapsing. I mean name me a paper currency that lasted longer than 80 years on this planet without a major restructuring, without collapsing?

This is a technical problem, I am pretty certain it will be addressed. Not that I care much about Bitcoin in itself, but I like the idea of competing currencies and this is definitely a revolutionary one, so it's interesting to observe. I don't think it's going away any time soon even with technical issues.

Re:Crap, the sky is falling

[glwtta]

Sure, sure... most real currencies don't go through that every two weeks, though.

Re:Crap, the sky is falling

[MadKeithV]

There is a pretty long list actually of places with serious inflation in recent times. It's not unlikely that there are slashdot posters from those areas, who have indeed experienced a currency collapse or at least runaway inflation in their lifetime.

Re:Crap, the sky is falling

[roman_mir]

I was born in the USSR, I lived through a number of currency collapses just in THAT country and then after the dissolution through collapse of new currencies created AFTER that country collapsed.

Yeah, I remember.

I also know enough history and geography that if you want, I can name close to 50 currencies of top of my head that collapsed. Oh, USA also had that, it was called the Continental. Today it's called the Federal.

Re:Crap, the sky is falling

[roman_mir]

Look up the history of currencies just over the last 100 years.

Latest off top of my head is North Korea with 100 to 1 devaluation over 2 day weekend.

90%? How about 99%?

Re:Crap, the sky is falling

[DarkOx]

Except that isn't even whats happening here. Its more like an issuing bank telling customers are retailers they are not going to do magnetic strip ATM cards any more and people need to replace their cards and equipment with the RIFD variety. Its a non-event except for people who were expecting to never have to upgrade software.

Re:Crap, the sky is falling

[fuzzyfuzzyfungus]

What is the actual 'real world' basis for this sudden notion that major 'real world' currencies can collapse any time? Yes, they can fluctuate a few percentages, that is very very very different than 60-70% loss of value recently for Bitcoin (or 90%+ the last time the price crashed).

The question I would ask is less 'can real world currencies collapse?'(yes occasionally one does, albeit generally one of the lower-tier ones); but 'do real-world currencies collapse outside of conditions where things are going all to shit across the board?'

Given how much fun it isn't, it's not as though you go through a round of hyperinflation just for giggles. It's not as though everybody wakes up one morning and says "I can see it so clearly now! My fiat currency is nothing but a political construct subject to the whims of politicians! It's all over!" and the currency's value against real assets suddenly dives for the floor. If the situation, as measured in actual economic activity, commodity availability, etc. goes to shit, the currency may well follow; but at that point your problem isn't that your currency is a paper lie; but that things have gone to shit, at least within the jurisdiction that minted the currency, if not more broadly.

Re:Crap, the sky is falling

[pla]

It's just that the new Bitcoin and the old Bitcoin are becoming two different currencies. People need to convert all their old Bitcoins to new ones to avoid this.

Bzzzt. Users of Bitcoin don't need to do anything beyond download a client written in the past year. They don't need to convert anything, they don't need to send themselves their balance to make sure the new program sees it, they don't even need to re-download the block chain. Just update their software.

Nothing about the currency itself has changed; just the removal of an artificial cap on block size placed in the original client, from back before the early developers expected it to take off so well.

Re:Crap, the sky is falling

[Chris_Jefferson]

However, other currencies don't have this problem where the currency just "breaks" suddenly, and basically stops working.

Imagine if bitcoin had been more popular, if everyone had bitcoin applications on their phone which take months to get updated, where half the world if running v7 and half v8. This would have (as I understand it, and I think I do) just fundamentally broken bitcoin, possibly beyond reasonable repair.

Re:Crap, the sky is falling

[Lord Bitman]

This isn't an issue of "two different currencies". What other time in history has a government issued a new currency, exchanged the "old currency" for the "new currency", and *let you keep* the "old currency" when handing you new currency?

The inability to deal with prolonged netsplits sanely is a fundamental limitation of the Bitcoin protocol.

Re:Crap, the sky is falling

[Serious Callers Only]

Total disaster, never happens in real world, not virtual one. Except for all the times when 'real world' currencies undergo devaluations, revaluations, forced exchanges, just plain old inflation, all the things that lead to currencies collapsing. I mean name me a paper currency that lasted longer than 80 years on this planet without a major restructuring, without collapsing?

I agree that the dangers of bitcoin forking have been overstated, and are something of a manufactured drama - technical problems like this are not very difficult to surmount. The real problem with Bitcoin for me is that the system is not transparent, and nothing backs the currency (unlike those fiat ones you mention above).

A currency is a token of trust (trust that others will value it the same amount), and that's a fragile thing.

Bitcoin is currently a small curiosity, it's only just becoming big enough to attract the interest of the real sharks, and I'm not convinced the creators have the resources, motivation or interest to keep the currency fair and secure once serious money becomes involved. Many of the exchanges are still pitifully insecure (run on VPSs !), the infrastructure is not well managed (witness problem above), and the creators probably never expected it to take off or really thought through the implications. Once there is serious money involved, lots of people are going to want to change the rules. If Bitcoin becomes popular it will be easy to coopt, devalue, and tax until it is just another currency, probably tied to a particular corporation or government. There's absolutely nothing you can do about that as a user of bitcoin. If the developers decided to change the direction of the currency you have your life savings in, devalue it, create a new block chain, you don't even have a vote on the matter.

Currently, if the government of your country or anyone else with the power to control the flow of bitcoins decide it should become valueless for you, or illegal, that can easily happen, if someone corners a significant supply of coins, they can manipulate the market (this is probably already happening as there are ZERO controls in place to stop it), if the public panics due to misinformation or rumour in such an illiquid market there is nothing to stop huge swings in value, and if a government decides to coopt the currency, shut down exchanges and change the rules by fiat, no-one is going to be able to trade in it and interest will evaporate. I see that as the largest problem with bitcoin by far - there are no backers putting up their own goods, no-one to trust, and no way to ensure that others continue to play by the same rules as they used to. It's certainly very appealing to utopian crypto-anarchists, but of limited interest to anyone who wants to store value or exchange it, given that it has the disadvantages of cash (anonymous, fungible) with none of the upsides (backed by a sovereign government, relatively stable, regulated to a greater or lesser extent, insurable etc), and a few downsides of its own (massively fluctuating value, built-in deflation, early-adopters privileged).

Because it is untraceable, and not guaranteed by law, it's of no interest to the majority of people who use currencies to store and transfer value and receive payment. I *want* my transactions to be traceable, so that I can prove to gov. and counter-parties that I have fulfilled my part of a bargain, made a payment, and should receive goods or services in return. If I don't want a transaction to be traceable (very rare, but conceivable), I'd use barter or some kind, but a currency outwith the control of government holds little interest for me, *precisely because* it is outwith the control of all the rules of society I value. Those who've had their valuable bits stolen from some VPS have no come-back using bitcoin, and no way to find a thief or enforce punishment - I'd demand far better than that for any currency I put trust in.

Re:Crap, the sky is falling

[roman_mir]

albeit generally one of the lower-tier ones

- I don't know what you consider to be a 'lower-tier one', when one is used on 1/6th of the total land mass of this planet, is it a 'low tier one'? I am talking about the USSR ruble in this case. I think that probably was the biggest currency collapse in terms of land area that used it.

Of-course in the former USSR there were many currency collapses, a number of times ruble was redefined and restructured all due to inflation and lack of productivity but huge government spending. That's what it takes: lack of productivity, government spending and thus inflation (the government controls the fiat currency and prints it to spend on government). But there is no productivity, so the increase in money supply only bids up prices for existing assets and products and prevents businesses from investing, because there are no savings in high inflation scenario and without savings the real interest rates are enormous. Of-course if that's also coupled with regulations and laws that prevent business from occurring then it's a double whammy. But really, think about the SIMILARITY of that to US dollar and the Euro (though in both cases there are areas where productivity is concentrated to a higher level, like in California, Switzerland, Germany, or resource rich areas, like Texas, Norway).

Nobody goes through hyper (or even just high) inflation for giggles, but note that the mainstream 'economics' is ALL about creating inflation. That's all that your 'economists' push for, that's all they promote. Well, that and higher taxes on the productive population, higher income redistribution. Really, those are not economists, from POV of economics they are shamans and politicians not economists.

All fiat currency IS a sham that is subject to whims of politicians, that's why it is FIAT. Fiat is by definition not real money and instead an abstract controlled (inflated) by the politicians, who like the power it gives them to spend without taxing and thus to keep in power.

This is different from Bitcoins in a very important way, though I DO NOT consider Bitcoins to be money. Bitcoins have 1 of 3 properties of money, but it is a useful medium of exchange that allows bypassing the official channels and fees and gives you speed and flexibility.

Also it's not commodities that cause inflation, commodity prices only respond to inflation, inflation is by definition expansion of the money supply.

Re:Crap, the sky is falling

[dbIII]

Funny thing is it just went up today.

Re:Crap, the sky is falling

[Anonymous Coward]

It is not a big thing. Countries do this to their paper money all the time. They issue new bills that are harder to counterfeit. Then they set a date - the old bills will not be accepted after that. No big deal because you can change all your old bills for new ones before the set date. Or just put money in some bank and let them sort it out. It seems "big" because the bills themselves gets invalidated, but it is not. It merely means you can't store money in a mattress (or private safe) indefinitely. Normal people don't do that anyway.

Bitcoin deals in software rather than pieces of paper. Both kinds gets upgraded from time to time, with the "old" kind becoming obsolete.

Re:Crap, the sky is falling

[bill_mcgonigle]

I am actually surprised the poor are not starting to band together and start killing the rich and stealing their stuff.

And that's why the rich banded together to cause the State to take money from the middle class and give it to the poor. Aka the "Progressive Era" (16th Amendment, Federal Reserve, etc.).

But, yes, that system cannot keep up with a collapsing currency. When I tell people who area concerned about the poor that the 1964 minimum wage was just under an ounce of silver per hour (~$1.25) and that today's value would be around $25 per hour, their eyes glaze over in disbelief. They cannot believe their State would do that to them, because the State cares for them like Mom does; it's not a bunch of corrupt, rich, and powerful actors only looking out for others to the extent it protects their own interests. It's especially unbelievable to Democrats who are bickering about the difference between $7 and $8 per hour. If I suggest to them that the difference in value has gone to the financial sector through steadily controlled inflation that has taken wealth out of local economies and sent it to the Wall Street/Financial Sector fatcats, they know for sure I must be one of those Occupy loonies. And forget about it if I tell them that 2/3 of their 401(k) appreciation winds up as fees to the same group - that Just Can't Be(TM).

Re:Crap, the sky is falling

[Anonymous Coward]

I can, I live in one of the countries in Eastern Europe. We remember economical crash of nineties and the time when paper money become almost worthless - people were losing savings of entire life. There was once a popular form of saving for houses for your children, backed by goverment, paid when kid enters adulthood. In one month you could buy for these savings nice two room flat, in next month you could buy for them maybe TV set or personal computer.

Re:Crap, the sky is falling

[JasterBobaMereel]

Real world currency - A currency that has a value backed by either :

              Physical something of real value - Gold, Silver, etc that actually exists in a vault somewhere

              A Large entity who guarantee to pay, and are trusted enough to do so (Government/Bank/etc)

      And/Or - Fiat currency that will always (and sometimes will only) be accepted for the purposes of paying taxes and so will always have value

        All real world currencies are usually legal tender - It is required that people have to accept legal tender as payment for good and services

Bitcoin - A currency backed only by the assurance that they cannot be faked/cheated but is otherwise free floating
          No-one has to accept Bitcoin, if they do they can assign any arbitrary value to it as an exchange rate depending on how much they trust it ...

Re:Crap, the sky is falling

[JasterBobaMereel]

My government will always accept the current legal tender for payment of taxes
Any one trading in my country has to by law accept the current legal tender in payment

Some people will accept other currencies in exchange for the legal tender or in payment at whatever exchange rate they deem appropriate, but it is not required

No-one *has* to accept bitcoin anywhere, and the exchange rate is therefore *only* subject to market confidence and nothing else - and could be zero tomorrow ....

Re:Crap, the sky is falling

[Anonymous Coward]

If it's troll, it's a 0/10 one. If it's not: "blocks" are basically pages in a global bitcoin ledger. This 7.1/8 fork was because 8 uses inch step for binder's punch holes, and 7.1 used 2.5 cm, so they can't file new pages from 8. The only effect of your client producing blocks too big is getting them not accepted by anyone else.

Re:Crap, the sky is falling

[seizer]

I don't think you know enough about Bitcoin, and I encourage you to read more about it. While it is hugely volatile, and even more hugely risky - not to say stupid - to "invest" in, I think many of your criticisms are invalid.

Bitcoin is absolutely traceable - it's far more traceable than cash. Read up about how the blockchain works (and see the Zerocoin proposal to see how it could be made untraceable, optionally, in the future). (The only non-traceable coins are those minted by miners with very paranoid security arrangements).

Cornering a "significant supply of coins" would take a significant investment of "real world" cash to actually corner these coins - not a trivial thing to get your hands on. So I don't think this is a large risk for the current Bitcoin ecosystem.

Also, you suggest that with regard to an entity trying to coopt or alter Bitcoin, "there's absolutely nothing you can do about that as a user of bitcoin". That's not true - simply running the reference software implementation makes you a node in the network, thus enforcing your (i.e. the default software's) set of rules on the transactions you do/do not relay. And additionally, the computing power deployed by today's miners would probably be impossible to exceed except by a very determined and well financed attacker. How much would a government spend to attack Bitcoin?

And if the "creators" (by which I suppose you mean the current set of core devs) try to create a new blockchain, good luck to them - the blockchain is far more resilient and the network runs as a democracy. It wouldn't work unless a vast amount of users also followed.

Your point about exchanges is key of course - they are extremely amateur operations right now. But that's easily changeable by hard work.

Digital cash ought to excite any geek - whether Bitcoin is "it", or simply an alpha version of something better yet to arrive, who knows.

Re:Crap, the sky is falling

[FireFury03]

Real world currency - A currency that has a value backed by either :

              Physical something of real value - Gold, Silver, etc that actually exists in a vault somewhere

But the value of the gold probably bears little relation to what its intrinsically worth. I.e. if gold weren't being used as a currency of sorts, it wouldn't be as valuable since its uses would be relatively minor (jewelery, electronics, etc). In this respect its very much like a fiat currency - it has an inflated value because people believe they can sell it on for a high price.

A Large entity who guarantee to pay, and are trusted enough to do so (Government/Bank/etc)

The "guarantee to pay" is a little bit meaningless here - I can't go to the government and tell them to exchange my bit of paper for something with intrinsic value. What makes a currency have value to me is that I believe that people offering goods and services that I want will be happy for me to pay for those goods/services in that currency. That has little to do with the government.

All real world currencies are usually legal tender

Untrue. For example, in Scotland there is no such thing as legal tender, but the pound sterling still works by virtue of the fact that it is usually worth someone's while to accept it.

It is required that people have to accept legal tender as payment for good and services

Also untrue. Legal tender just means a creditor has to accept it as payment of a debt by the debtor. If you haven't incurred a debt already then the person you're paying can tell you to go take a hike rather than accepting your money. For example, at the point you reach the checkout in a shop, you haven't bought the items so there is no debt - the shop is well within their rights to refuse a legal tender currency. Of course, most people have no problem accepting one of the mainstream currencies so won't refuse, but this may not always be the case with very unstable currencies.

No-one has to accept Bitcoin, if they do they can assign any arbitrary value to it as an exchange rate depending on how much they trust it ...

So, the same as any currency then.

Re:Crap, the sky is falling

[thoth]

Just update their software.

Yes, "that's all" clients need to do. But since the BitCoin enthusiasts are generally anti-government anti-central-control Libertarian types, how do you force anyone in particular to upgrade? Won't they see that as some sort of central control coercing them against their will?

To me, this is the most fascinating about BitCoin so far and I'm interested to see how it is handled. In a network with no central control made of anti authority anti coercion attitudes, how to you force a client software upgrade? Maybe some dedicated hardware miners can't upgrade?. Especially if a significant block of miners remains on pre-bugfix clients? Maybe they just won't give a shit and ignore post-bugfix signature blocks.

Re:Crap, the sky is falling

[squiggleslash]

You can remember your currency collapsing during your lifetime?

Oh, USA also had that, it was called the Continental. Today it's called the Federal.

Wait, how old are you?!

Re:Crap, the sky is falling

[jythie]

Which touches on a long term problem. As bitcoin support/bridges slowly work their way into other systems, upgrading clients becomes a bigger and bigger problem. For technically inclined individuals this is not a problem, but clients integrated into larger stacks like ecommerce systems or even banking/payroll systems.. well... those tend to change much more slowly and requiring an update in order to be able to use the currency is not a small deal.

Which is one of the weaknesses of bitcoin, the currency and the implementation are intertwined.

Re:Crap, the sky is falling

[roman_mir]

I don't know, after all inflation and restructuring.... pretty old

Re:Crap, the sky is falling

[pne]

Fiat is by definition not real money and instead an abstract controlled (inflated) by the politicians

Can any money be "real"? Isn't money by definition an abstraction that we use because we don't want to keep swapping deer hides for horseshoes?

Re:Crap, the sky is falling

[roman_mir]

No, gold is real money. Fiat means 'by law' or 'by decree', real means that the people use it without anybody forcing them, they just see it as money and gold fits that very well.

Also as to 'price' of gold or value, today it costs mining companies about 1100-1200 USD to mine an ounce, so that's inflation. All these people saying: there is no inflation, are they insisting that inflation only limits itself to the gold mining sector?

How about the stock market at 15000, you think that's based on actual economic activity? :) No, it's inflation, that's where inflation is going right now, the stock market, the bond market and the housing market again.

Re:Crap, the sky is falling

[roman_mir]

Measured in US dollars gold today takes about $1100 to $1200 to mine to get an ounce, so it's not as far away from it's current spot price as you may think. In fact there are many 'economists' who say that gold is in a bubble completely neglecting the cost of its production (which went up considerably in the last 10 years due to 'noneixsting' inflation, non-existing if you take gov't word for it). They are even saying that gold mining companies will go out of business in this 'gold bubble' because price of gold in US dollars will go down.

So wait, price of gold in US dollars will go down, which will crash the miners but the metal is in a bubble? Realise the absurdity of that. If gold costs that much to produce that companies are shutting down production, then prices should be going up, not down :) supply demand in action, because of the price of gold as measured in US dollars is not going higher as it should due to the cost of production (JPMorgan is using every trick in the book to attempt and manipulate the nominal price) the companies that mine it stop mining it. This means the supply is shrinking, and indeed, in the physical market the premiums are HUGE, never seen before, that's because there is NO physical gold at the 1400 or 1500, nobody can deliver it to you (this includes silver). There is 100 times as much 'paper gold' as there is physical, so all it takes is 1 large delivery request........ There are many many things here I could write for days probably, the Cyprus situation, GS 'premonitions' and existing short positions while sending 'sell' signals. Basically the real money that cannot be printed is a serious threat to the fake monetary system of the world.

I suggest simply paying attention to what China is doing to realise what is real and what is not.

Re:Crap, the sky is falling

[ArcadeMan]

...name me a paper currency that lasted longer than 80 years on this planet without a major restructuring, without collapsing?

Does Canadian Tire money count?

Re:Crap, the sky is falling

[FireFury03]

Untrue. Legal tender means it is legal to OFFER payment in cash. However, nobody is required to ACCEPT your cash payment.

"Legal tender has a very narrow and technical meaning in the settlement of debts. It means that a debtor cannot successfully be sued for non-payment if he pays into court in legal tender."
http://www.royalmint.com/aboutus/policies-and-guidelines/legal-tender-guidelines

So ok, no one is required to accept the payment, but they are essentially required to write off the debt if you offer payment in cash, whether or not they actually accept it.

Re:Crap, the sky is falling

[bill_mcgonigle]

Can you please explain the $1.25 -> $25 calculation. Do you have a source for this information?

It's just arithmetic, but perhaps I can explain how to do the calculation. In 1964 a quarter was 90% silver. It weighed 6.25 grams, so 5.625 grams of pure silver. data source.

Five quarters ($1.25) was therefore 28.125 grams of silver. A troy ounce is 31.1 grams, so minimum wage was almost exactly 0.9oz of silver.

The 52-week range of silver has been between $21.12 and $35.30 - currencies are fluctuating wildly with the current financial crisis, but even within that chaos, an equivalent wage would be between $19.00 and $31.78 for the past year. $25.39 is the middle of that range. We also know that the market price is manipulated (like LIBOR and other benchmark rates) since paper funds can't fill their physical orders, so one can consider that price to be depressed to some degree (how much is unknown because it's not a real market).

So, how many of the current financial problems (cost of education, cost of health care, cost of gas, cost of food, etc.) would really be problems if the wages had held steady? The obvious explanation is that those prices are all rising together with monetary inflation and it's just wages that are falling relative to it, causing the economic suffering.

If you follow the 20th Century wage chart, from the beginning to 1971, when the US went off the real-money system, wages rose (in terms of real money) right in step with productivity improvements. Since 1971, productivity has continued to increase steadily, but wages have been flat (the difference goes to the financial sector, on net). If the slope of that chart is extended out to present day, it intersects at about $29/hr, fairly consistent with the real-money methodology. $29 has been the price of 0.9oz of silver in the past year, so with the caveat that prices bounce around from day to day and week to week, on an smoothed basis it's right in the zone of where we should be, or a bit lower.

People aren't taught in school that the Federal Reserve is a private corporation owned by its member banks, with its board and president composed of representatives of the biggest multinational banks. Even though its charge is to protect the value of the US Dollar, the USD has lost 98% of its value over the past century (this year marked 100 years of Federal Reserve control of the currency). However, if anybody suggests that the Fed's policies, which have fabulously enriched the financial sector, led to this currency failure for any reason other than pure chance or bad luck, then they are labelled a 'conspiracy nut'. To avoid being called names, pure faith in their virtue is required and any skepticism must be jettisoned.

Which brings us back to bitcoin...

Re:Crap, the sky is falling

[julesh]

This isn't an issue of "two different currencies". What other time in history has a government issued a new currency, exchanged the "old currency" for the "new currency", and *let you keep* the "old currency" when handing you new currency?

The inability to deal with prolonged netsplits sanely is a fundamental limitation of the Bitcoin protocol.

Erm. That is not even approximately what's happening here. There is no old or new currency, no exchanging happening, and no inability to deal with "netsplits" as you put it -- there is a built-in algorithm that is used to resolve cases of chain forks. It is unfortunate that some of the older mining software out there won't recognised the existence of the fork and will therefore happily carry on working on the broken incorrect chain, which may therefore cause some buggy older clients to report transaction success or failure inaccurately, but the chance of this actually affecting anyone's actual money is actually tiny. Other than the miners who haven't updated, who will lose their mining fees. But as they're the equivalent of bankers in this system, nobody actually cares about them...

Re:Crap, the sky is falling

[bill_mcgonigle]

I checked two [bls.gov] separate [westegg.com] inflation calculators

Yes, they both use CPI, the government-generated inflation calculation that shows no problems with the government's behavior.

Whihc is fine unless you find interesting that the CPI methodology keeps changing to reflect a lower standard of living (e.g. substituting hamburger for steak in the basket of prices), ignoring the price of energy, etc., while the claim of low inflation is trumpeted in the newspapers. Check out what CPI looks like if only the BLS methodology in place from the late 70's to the early 90's is continued as it was previously calculated.

It's not news that people can lie with statistics. It's incumbent upon people who use statistical indicators to verify the validity of those indicators before using them as proof of anything.

Re:Crap, the sky is falling

[bill_mcgonigle]

On the other hand, the minimum wage expressed in silver is about the same as the early 1980s, so it can't be that bad...

I assume you mean the very short term spike in silver prices when the market was cornered? Use a 52-week average and re-run the number.

And it could have nothing to do with the fact that in that time production has only doubled while industrial demand has grown much more, on top of which investment demand has grown too...

Shall we figure in every 10c to $1 coin in circulation being made of it? That's a massive amount of silver.

And funny how you didn't use gold, where in the 60s minimum wage would have gotten you about an eight of a gram... and it would get you about that much now too.

What? No way, man. The price of gold was fixed at $35/oz until 1968. Minimum wage would have netted 1/28th of an ounce of gold, or 1.11 grams. The 52-week range today is $1322-$1803. That works out to $47-$64 today.

Minimum wage today, would, as you point out, buy about 1/8th of a gram of gold. Don't mix up grams and ounces - you need to divide by 31.1 to get grams. Do 1.11g/.15g (actual USD price today at $7.25/hr), and you get a ratio of 7.4x more earning power in 1964 than today - not the same.

Re:Crap, the sky is falling

[bill_mcgonigle]

Assuming your numbers are correct, why do you think people should be compensated at a rate proportional to the value of silver?

Silver has been the 'people's money' for thousands of years across various societies because it has most of the properties of good money. Gold is slightly better, because it does not tarnish, but it's so rare that it's hard to have sufficient liquidity for gold.

But silver is just a benchmark - we could use something else. Perhaps bitcoin even. The US used gold and silver from 1781 to 1971 and "good faith" from 1971 to 2013 (be careful to avoid chronological ethnocentrism).

Regardless, what people should not have to endure is falling purchasing power from their wages as the productivity of the marketplace improves, which is what we have by using the fiat version of the USD.

Re:Crap, the sky is falling

[pla]

Fortunately, it's only mining software that needs to be updated. Anyone just handling ordinary transactions doesn't really need to worry.

Just so you know - You have that exactly backward.

Re:Crap, the sky is falling

[bill_mcgonigle]

You're right, that's part of it that I left out. When the government spends in deficit, the Fed "prints" more USD and buys bonds with it.

If the total number of units of the USD (let's call it D) is worth some valuation (call it V), then each unit of USD (i.e. $1, call it P for purchasing power) is worth the ratio. So, P = V/D. As D increases at a rate greater than V, the value of P decreases.

If a commodity, say coffee beans, has a value of B, and the price of coffee is C, then C = B/P. As P decreases, then C increases.

The coffee bean farmers in Guatemala certainly aren't going to give us a discount because our printing presses are running at full speed.

Now, this is partially untrue, since the Breton Woods agreement set the USD as the world reserve currency, since it was a paper analogue for gold. The US has enjoyed being able to "print world gold" for 40 years now, but over the past several years many of the world powers have moved to exchange their currencies directly, rather than through a USD intermediate. As this trend continues the artificial value of the USD (40-60% by some estimates) will continue to fall, making things seem more expensive to US purchasers.

There are measures put in place to halt this, though. Saddam Hussein was moving to price his oil Euros and Gaddafi was organizing a gold dinar for African oil sales. Oh, but WMD's.

Re:Crap, the sky is falling

[Wonko the Sane]

The problem was old clients did not allocate enough Berkeley DB locks in order to process every valid combination of transactions. Newer clients correct this problem, and users are recommended to upgrade.

If they can't upgrade, then all they need to do is add a configuration file to the directory containing the database with the right MAX_LOCKS setting.

There are no force upgrades here, no forking of the currency - just correcting a misconfiguration that we didn't notice until recently.

Re:Crap, the sky is falling

[Raenex]

But silver is just a benchmark - we could use something else. Perhaps bitcoin even.

Why would you use any of those things instead of looking at basic necessities? Why don't you compare the price of a loaf of bread or a gallon of milk, for example? I don't give two shits about gold or silver.

Re:Crap, the sky is falling

[iluvcapra]

According to that chart the US has had almost 10% inflation for a decade -- it's ridiculous, or at least if it were true, it would call into question the utility of such a measure. If such a measure were accurate, that would mean that real wages have not just been stagnant, but had been declining in excess of 5% a year, and that the median wage-earner's real wealth has been declining precipitously since the 1980s. I guess you can make the numbers look that way, but it's subjectively nuts.

They substitute hamburger for steak because people don't buy enough steak for it to be an adequate model of the consumer basket -- it's a luxury good and it doesn't behave like a proper staple commodity, it's bought when it can be afforded, it's subject to regional and seasonal price changes, and purchasing decisions related to it were not correlated to inflation. From the Boskin commission report:

5. The BLS should study the behavior of the individual components of the index to ascertain which components provide most information on the future longer-term movements in the index and which items have fluctuations which are largely unrelated to the total and emphasize the former in its data collection activities.

This could result in the down-weighting or even elimination of data collection for certain cities and a revision of the commodity structure of the index which would consider some goods as having a national market, sampling a larger number of items but with less regard to geography, focusing on geographical differences only for more "local" commodities, such as fuel costs, rent, personal services, and fresh produce.Currently, the BLS collects a large number of price quotes on bananas, because they are inexpensive to collect and their prices are quite variable, even though these variations are not related systematically to the underlying trend-movements in the CPI. At the same time, less attention is paid to less variable but more likely to change (disappear or be redesigned) and harder to measure commodities, such as surgical treatments, consumer electronics, and communication services.

They changed the CPI calculations in the mid 90's because the CPI's method up to that time was completely unscientific and based on arbitrary, non-evidence based preconceptions about what people shopped for. Meanwhile they eliminated food and energy from the core CPI because they concluded these prices were far too volatile to aid in policy making, and in the end food and energy are just inputs into other processes which are eventually priced by the CPI. They also made the very wise decision of eliminating house prices from the calculation, substituting equivalent rent. The consensus among economists is that the CPI was overestimating inflation throughout the 80s.

I'm not going to say there can't be more room for improvement, but I think you're wrong on this point, and your account of how the CPI works is glib and biased.

Re:Crap, the sky is falling

[Yebyen]

AC sibling comment is right, but I think he's neglected to point out exactly what you've already mentioned that explains the difference between payments that must be accepted and payments that can be refused.

Valid and legal offer for debts when tendered to a creditor -- in other words, you do not need to accept my money for goods or services, and provide them, in that order. If you are operating a restaurant for example, and you've provided the service (or goods) first, on honor as many restaurants do, in order to put a price tag on it and settle the bill all at once... now you've brought the check to the table, I'm obligated to pay that debt, since your prices were clearly marked and I accepted the service. You are required to accept my legal tender (even if it's pennies) at this point, or you can take any other form of payment that you're willing to accept, if it's a credit card or bitcoin or some other "non-tender". If I offer pennies and you refuse, I can always argue that I offered to pay the bill, and you can't say I didn't try to discharge the debt. That is what's intended by the treasury statute you quote, in USA at least.

If you are operating a Chinese Buffet or take-out (for example) and you are demanding payment before services are rendered, you are free to refuse the service to anyone who can't pay in only nickels, if that's your wish, or anyone for any reason. It's not a debt incurred for me until you've allowed me through the door, when I sit down and accept the food, to start eating it. If you refuse the service for any reason, then no debt means no tender. If you bring me food and I'm not happy with it, I can refuse the delivery and again, I don't owe you anything. No tender required.

In the 2020s bitcoins will run out anyway

[Viol8]

Making the whole thing nothing more than an interesting academic exercise. Anyone who thinks bitcoin is the new gold or even frankly a replacement for ordinary money transactions is utterly deluded.

Re:In the 2020s bitcoins will run out anyway

[aaaaaaargh!]

In the 2020s bitcoins will run out anyway

What do you mean by that? I thought that the very idea of bitcoins is that at some time no more can be produced, thereby causing deflation.

Re:In the 2020s bitcoins will run out anyway

[fuzzyfuzzyfungus]

Bitcoins are not consumables. They can be reused infinitely. They do not "run out".

They are data, though, and we all know how good at keeping backups people are...

Re:In the 2020s bitcoins will run out anyway

[Anonymous Coward]

"Bitcoins" are kept in the blockchain. That means that there's tens of millions of "backups" all over the world. What people customarily mean by "bitcoins" is actually the private keys to sign them over other people (your bitcoin "wallet" contains not bitcoins - they're in the blockchain - but the decryption keys that prove that you own them).

Backing up decryption keys is not hard. If you use a deterministic wallet, you just need to remember a passphrase, making it even easier.

Re:In the 2020s bitcoins will run out anyway

[fuzzyfuzzyfungus]

It isn't that backups are 'hard'(though in complex situations they can be harder than they look), it's that people don't do them, or don't know that they were doing them wrong until it comes time to find out the hard way. They also forget passwords, get hit by trucks, and otherwise suffer from unexpected data loss.

My thesis is hardly that 'zOMG, all the bitcoins will disappear!!!'; but that there will be attrition over time, with greater attrition if they gain traction with the relatively clueless.

Re:In the 2020s bitcoins will run out anyway

[pla]

Try 2140, not 2020. Your larger point may stand, but the specific urgency of it happening in the next decade - Or even without our lifetimes - does not.

Re:In the 2020s bitcoins will run out anyway

[fastest fascist]

If you burn your cash, can you call someone to get it back? At least you can have backups of your Bitcoin wallets.

Re:In the 2020s bitcoins will run out anyway

[AmiMoJo]

Consider this. Since there a some limit on the maximum number of Bitcoins any that are lost are gone forever. Wallet file misplaced or destroyed, coins stolen but unspendable (because although they are anonymous they are traceable), or simply sitting on forgotten hard drives somewhere.

Governments can print new notes to replace old ones that no longer exist or are presumed lost. Bitcoin has a hard limit.

Re:In the 2020s bitcoins will run out anyway

[stinerman]

That's a feature, but it's not a good feature to have (for Bitcoin). A currency's success is measured by its ability to facilitate commercial transactions, not by its ability to make you rich simply by holding it. That's what *investments* are for. Currency isn't an investment and shouldn't be.

The fact that there could never be any more Bitcoins ever again would encourage speculation and hoarding, which is not what you want from a medium of exchange.

If you're worried about currency devaluation and put some of your money/time into Bitcoins, that makes sense as a hedge against inflation (ie. an investment), but nothing more.

Re:In the 2020s bitcoins will run out anyway

[DaveV1.0]

A) That is why people keep money in banks, B) Yes, you can, sort of. In the U.S. you gather up the burned remnants of your cash and send it to the U.S. Mint where they have an entire department consisting of people whose job is to go through such remnants and determine how much money they can actually identify and then that amount will be returned. Now, what happens if someone figures out a way to break the encryption? What happens if someone steals and makes public many of the decryption keys? What happens if someone makes an affordable quantum computer that can produce the keys in trivial amounts of time? The problem with using math as a currency is that a math trick can destroy the value of the currency.

Those disastrous forks

[Chrisq]

Those disastrous forks can be a real nuisance.

Damn

[MadKeithV]

Damn, I thought this was going to be the last forking warning against posting Bitcoin stories on Slashdot.

Argentina, Iceland, Hungary, Ukraine,

[Anonymous Coward]

"What is the actual 'real world' basis for this sudden notion that major 'real world' currencies can collapse any time?"

There's quite a few currency collapses, you really don't need to go back far, Argentina was the last major one in 2002, since then Iceland, Hungary, Ukraine, Zimbabwe, quite a few African ones.

http://en.wikipedia.org/wiki/Argentine_economic_crisis_%281999%E2%80%932002%29

It's the usual problem with fiat currencies, they spend more than they earn, they print money to cover it, the currency collapses.

When the US had a meltdown in 2007, they did a massive currency swap with the Eurozone. The effect of that meant that the US central bank had euros to sell as well as dollars, and could sell euros and buy dollars to prop the currency up if panic ensued. You came a lot closer than you realize, I find your comment somewhat glib, based on ignorance of how bad 2007 asset collapse was.

Re:Argentina, Iceland, Hungary, Ukraine,

[MyLongNickName]

Gotta love how libertarians keep blabbing about "fiat currencies" and how the currencies can collapse "at any time". While technically true, currencies collapsed under gold standards, and probably at a rate faster than what you see in today's economy. What folks don't seem to understand is that money has no value in and of itself, but is based on a population's ability to produce goods and services. Whether you use bitcoins, greenbacks, electrons on a hard drive or gold doesn't change this truth.

By definition, money is simply a means of exchange... tying it to an arbitrary material is silly. In the old days, countries manipulated currencies through artificial means and like today when those means run their course, bad things happen.

So, gold, paper or electrons, a country's prosperity is tied to the competence of its government. While this is a scary fact, it is the truth.

Re:Argentina, Iceland, Hungary, Ukraine,

[roman_mir]

By definition money is store of value, means of exchange and unit of account. Fiat currencies have nothing to do with gold standard.

Gold is the money, gold standard means that there is an equivalent amount of notes (not fiat money, but redeemable bank notes), so you can get the weight of gold back for that paper from the bank. It's like using deposit box keys where you store gold as medium of exchange. Gold as money doesn't 'collapse', but currencies that are supposedly backed by gold can collapse because the entity issuing them can print an unlimited number of them and then just say: sorry, we don't have the gold to redeem for your paper.

That's what Nixon did to US dollar, rather than allowing the dollar to revalue from 35 bucks to 100 or so that it would under those conditions, he defaulted on the money.

Baseless US dollar now is 42 years old. Under normal circumstances I would say it's at 50% of its life span, under the current circumstances I must say it's closer to 98% of its life expectancy.

Re:Argentina, Iceland, Hungary, Ukraine,

[Anonymous Coward]

My Great Grand Father lost more currency value then you want to imagine by insisting on holding the Weimer Currency. I am guess just under a 1/2 billion in today's dollar valuation, also he lived in sweden, so it wasn't like he had to own weimer's money. It didn't ruin him but it cost him most of his wealth. So I know that the Weimer wasn't some fly by night currency people bought it and held it just like you might hold Europes, Yen, etc. The lesson I've taken from this is that paper money is meaningless always invest in real companies and things. I don't know if holding stock in Germans biggest companies would mean we'd still own stock today but it possible. My dad also lost value due to inflation. We where cleaning out my grandfathers house when we came across some Swedish bonds given to my father as a 16th birthday gift. Since they only paid interest for 10 years, they weren't worth the hassle of redeeming due once again to inflation. My dad when he first saw them again said. "Couldn't they have bought me stock in volvo or some other big company."

Re:Argentina, Iceland, Hungary, Ukraine,

[squiggleslash]

By definition money is store of value, means of exchange and unit of account.

No. Means of exchange and unit of account, yes. Store of value? No. That's a fundamental misunderstanding which leads people to run around pretending that low rates of inflation are a conspiracy and that the world will end if we don't switch to the gold standard.

It's a medium of exchange and unit of account only. We print up sheets of paper (and mint coins) solely to make the transactions easier, but to a certain extent you and I can create and destroy money - actual dollars - in the time it takes for me to say "I'll sell you this TV for $100" and you to respond, "Sure, I'll owe you, is this IOU OK?" The Fed (and the banks it regulates) doesn't even have a monopoly on money creation.

You get scared because it seems to you obvious - despite being wrong - that if something can be used to transfer wealth it would follow that holding on to it would mean you keep that wealth. But money isn't wealth, it isn't value. And you holding on to it doesn't benefit anyone, it just means you make it more difficult for others to engage in transactions (because you're holding onto the unit of exchange) until someone else creates more money - which, ironically, you then crap your pants about.

Re:Argentina, Iceland, Hungary, Ukraine,

[AthanasiusKircher]

By definition money is store of value, means of exchange and unit of account.

Things only have "value" if (1) other people need them, or (2) you can convince them that having those things will allow them to get other things that they need. The first type of value leads to direct barter; the second leads to a medium of exchange... a currency... "money." What form that "money" takes is up to the people in power who hoard it or give it out and can convince other people to accept it.

Gold is the money, gold standard means that there is an equivalent amount of notes (not fiat money, but redeemable bank notes), so you can get the weight of gold back for that paper from the bank. It's like using deposit box keys where you store gold as medium of exchange. Gold as money doesn't 'collapse',

Gold could easily "collapse" if no one wanted it. If I'm starving out in the middle of the desert, and you offered me some food and fresh water or a bag of gold coins with a thousand times the value of the food, which do you think I'd take?

Anything relatively rare can function as money, but only if people actually believe that anyone else would take it. Your "shiny rocks" don't have any more inherent value than someone else's "green pieces of paper," since neither is particularly useful to humans absent some sort of power structure that endows that "money" with value.

Suppose the world economy completely collapses and all of your fiat currencies go in the toilet. You have 17 gazillion tons of gold in your own personal vault, but nothing else. I have a few crates of canned food and a pile of random rare old bottlecaps that I like to collect. I start telling people I'll accept these particular rare bottlecaps in exchange for food. Pretty soon people in my town understand that those bottlecaps have value, because I -- who have control of food, something people actually need -- accept them as currency.

Now you come to town and try to buy food or other essential goods with your gold. Do you seriously think anyone will sell anything to you? Nobody wants your shiny rocks. The person in power likes rare bottlecaps, and that's the only "money" that matters now... aside from actual food.

The idea that "shiny rocks" have any inherent value is just as stupid as the idea that "green pieces of paper" have inherent value. If you can't see that, I don't know else to say.

Re:So upgrade the clients to version 8.

[Chrisq]

So upgrade the clients to version 8. Problem solved.

It worked so well for windows, didn't it?

Extra value!

[Anonymous Coward]

As a digital coin collector, I am extremely excited by these rare, limited edition "forked" bitcoins that will soon no longer be tender. I am trying to gather up as many as I can.

ASDFnz is a liar

[ras]

ASDFnz writes "It has been just over two months since the bitcoin block chain was rocked by a near disastrous fork causing the bitcoin price to crash. ..."

Right. Near fucking disastrous. You can see the effect right here, after clicking the "DRAW" button. At least, if you look very hard, and squint just right, you might just be able to pick up the crash that happened 2 months ago.

Actually, I can't see a bloody thing. ASDFnz is a liar.

Re:ASDFnz is a liar

[tantrum]

2 moths ago, price was 240. Now it's 120. That's half the size it used to be. I think the trouble is you have trouble seeing the screen with your head up your ass. Enjoy your nerdcoins.

2 months ago bitcoin was at 46, now it is 118 :)

The was a sharp in this period, but overall it has been growing steadily so far.

Tulips anyone?

[WinstonWolfIT]

Or beanie babies? Anyone? Anyone?

Let me see if I understand this

[davidbrit2]

Basically, the long block chains are $2 bills, and the 7.1 client is Taco Bell. Is that about right?

Re:Rather obvious isn't it?

[thegarbz]

With 21million BTCs dividable into 100million satoshis each I think the world will have plenty of artificial bits to spread around.

Re:Rather obvious isn't it?

[Meneth]

And if we need more division, we can always update the client software.

Thailand, Indonesia, Ruble, Turkey, America

[Anonymous Coward]

Oh and Thailand in 1997, followed by Indonesia (dropped 83% of its value), South Korea... (remember the Asia crisis?), the post soviet Russian ruble collapse, Turkey Lira collapse went right up till 2001, in 2004 they had to knock *six* zeros of the end of the bank notes!

America had it's collapse of the continental, courtesy of the states printing money:
http://en.wikipedia.org/wiki/Early_American_currency

"Continental currency depreciated badly during the war, giving rise to the famous phrase "not worth a continental".[10] A primary problem was that monetary policy was not coordinated between Congress and the states, which continued to issue bills of credit."

Sound familiar?

2 months ago

[Anonymous Coward]

The crash was not caused by a fork. The crash was caused by over-valuation coupled with the largest DDoS MtGox had ever experienced. The trading system slowed to the point that user's sell / buy trades weren't going through and it caused a panic. MtGox was taken down while they upgraded network infrastructure to deal with the shitty DDoS people. When they came back up, other exchange's had already begun the dive. It dove and corrected repeatedly, until it panned out and has been relatively stable since.

The article is bullshit.

Re:2 months ago

[tompaulco]

The crash was not caused by a fork. The crash was caused by over-valuation coupled with the largest DDoS MtGox had ever experienced. The trading system slowed to the point that user's sell / buy trades weren't going through and it caused a panic. MtGox was taken down while they upgraded network infrastructure to deal with the shitty DDoS people. When they came back up, other exchange's had already begun the dive. It dove and corrected repeatedly, until it panned out and has been relatively stable since.

The article is bullshit.

AC is correct. The fork was two months ago. When the fork happened, the price on the historical chart is not even perceptible. Heck it may have gone up that day from all I can tell. AFTER the fork, the price climbed to 4 TIMES the value of before the fork, and is currently trading at more than double that price. So the article is just an out and out lie and FUD. We should not consider any more submissions from this submitter.

worgl-experiment

[NewYork]

I believe http://www.lietaer.com/2010/03/the-worgl-experiment/ is a better solution than Bitcoin