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

[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

[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

[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

[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

[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

[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

[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.

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,

[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: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.

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: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.

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.