Sinkhole Sucks Brains From Wasteful Bitcoin Mining Botnet

judgecorp writes "A sinkhole has taken a quarter of the bots out of the ZeroAcess botnet which was making money for its operators through click fraud and Bitcoin mining. This particular Bitcoin mining operation was only profitable through the use of stolen electricity — according to Symantec, which operated the sinkhole, ZeroAccess was using $561,000 of electricity a day on infected PCs, to generate about $2000 worth of Bitcoin."

Comments

RoI

[Thanshin]

" ZeroAccess was using $561,000 of electricity a day on infected PCs, to generate about $2000 worth of Bitcoin/"

Just as with government spending, the important the RoI must take into account the origin of each money input.

i.e.: The $2,000 must not be compared to the $561,000, but to the cost of developing/acquiring the botnet.

Re:RoI

[Vintermann]

It would if we were interested in the botnet owner' profit margin. However, we're more interested in what costs the botnet owner impose on society in comparison to his private gains. Someone who would smash a $1000 computer to gain $1000 for himself is deemed less contemptible than the one would do it for $1 for himself.

Re:RoI

[kieran]

No, the $561,000 should be compared to the cost of smashing the botnet. What the botnet arseholes make is of purely idle interest.

Re:RoI

[Chrisq]

It would if we were interested in the botnet owner' profit margin. However, we're more interested in what costs the botnet owner impose on society in comparison to his private gains. Someone who would smash a $1000 computer to gain $1000 for himself is deemed less contemptible than the one would do it for $1 for himself.

I'm not sure about that. There was an article in a local paper about someone who did £1,000 worth of damage breaking into a soft-top sports car to steal a pack of biscuits on the seat. The general consensus was that he was a loser and a moron but he got a lower fine than someone stealing £1,000 worth of goods woula have done.

Re:RoI

[Anonymous Coward]

The moron was the owner of the car.

Speaking as an old California boy, who has always had convertibles... anyone who locks the doors of a convertible deserves what they get.

Re:RoI

[benjfowler]

Probably done by spammers.

E.g. Creating huge amount of damage for other people to clean up, to collect a few illicit pennies for yourself.

This is typical spammer MO.

Re:RoI

[Chrisq]

The moron was the owner of the car.

Speaking as an old California boy, who has always had convertibles... anyone who locks the doors of a convertible deserves what they get.

Not necessarily in the UK, where leaving a car unlocked can be grounds for the insurance refusing to pay out if it gets stolen. -- ~~~~

Re:RoI

[Anonymous Coward]

Well, I guess if I had a convertible in the UK, I'd lock it then. But I'd leave the windows rolled down, or somesuch. But first I'd speak to my insurance company - I have a difficult time believing that there are no special rules/exemptions for convertibles. They would seriously demand that you lock your doors to protect fifty bucks worth of groceries, AND be fully prepared to pay for the replacement of your top when somebody sliced it to open the door lock and get at those groceries? Somehow I doubt that.

Whatever you might keep in your car (and if you own a convertible you tend to be careful about that), it's just not worth having your thousand-dollar top slashed so that a thief can gain entry.

Fascinating that my previous post got down-modded. What's wrong with reality... with how the world actually works?

Re:RoI

[bmuenzer]

In Germany, leaving your car unlocked can cost you a fine of up to 2000 EUR (see StVO 14.1; StVO 49.1.14, StVG 24. In addition, you will lose your insurance coverage.

Re:RoI

[Big Hairy Ian]

Personally I liken these muppets to the idiots who steal Henry Moore sculptures and melt them down for scrap!

Re:RoI

[Chrisq]

I have a difficult time believing that there are no special rules/exemptions for convertibles. They would seriously demand that you lock your doors to protect fifty bucks worth of groceries, AND be fully prepared to pay for the replacement of your top when somebody sliced it to open the door lock and get at those groceries?

I don't know about every policy, but this is typical:

What is not covered?
...
* loss or damage caused by theft or attempted theft or fire if your car has been unlocked and unattended or the keys have been left in or on your car
...
* property from an open and/or unlocked convertable car, unless the property was locked in the boot or glove compartment

Re:RoI

[drinkypoo]

They would seriously demand that you lock your doors to protect fifty bucks worth of groceries, AND be fully prepared to pay for the replacement of your top when somebody sliced it to open the door lock and get at those groceries?

You have no idea how mandated insurance works, do you? They don't really pay for the replacement of your top. You and all the other insured do that. Since you're required by law to have car insurance, you're still going to get the insurance even though it's unfair. And because it's mandated, all the insurance companies can abuse you, because there's more money in it than being the one that doesn't — who will quickly find themselves put out of business by all the others one way or another. Maybe buying legislation to make them act like assholes, for example.

Re:RoI

[bluefoxlucid]

This is a good illustration about how wealth transfer works, though. Each economic activity has a cost. Economic activities which are rent-seeking--which draw increased revenue without increasing actual value--are damaging in this way. Economic waste is also damaging in this way.

This is why, for example, overpricing the market by artificially limiting supply (labor i.e. electricians and plumbers, goods i.e. diamonds, etc.) makes some people rich but has a disproportionate cost--the profiteers gain $100,000, but the net economic impact is $150,000 or so, and so the economy is $50,000 less wealthy but these folks don't care because they're $100,000 more wealthy and fuck everyone else.

This is also how churn of goods works. Tearing down a bridge that needs $1M of work to remain viable for 10 years to instead rebuild a $100M bridge in its place doesn't make the economy stronger; it temporarily creates jobs at the expense of whoever's paying for the bridge (usually taxpayers), who end up poorer, thus don't spend as much in their local economy or in the wider (national, global) market, weakening the economy overall by reducing its ability to respond to new opportunities and instead diverting money to bridge builders.

Also like the bridge, buying a new iPhone every 3 months--a more personal decision, but one with the same impact, and one that's not "DEH GUBERMENT SHUDNT BE SO SOZIALIST!" Yes, we can have that same socialist wealth destruction in a completely capitalist free market by people being idiots. On the other hand, handing down that iPhone to someone who has less money and will get it free or at a discount will keep the wealth in society. That's why I encourage people to donate their old goods to i.e. Good Will or such, rather than trashing them. Those things still useful retain value, and passing them on at steep discount to those who cannot afford such goods will enrich society by retaining wealth that would otherwise be lost to landfilling or re-processing (recycling, etc., investing more labor) perfectly useful goods.

In this case, a lot of folks are poorer and a lot of resources are wasted; but power companies are a good deal richer, and the botnet operators have more money. Society is poorer, a few players are richer. The botnet operators are as a small boy who walks through the town periodically breaking random windows so that the glazier can retain his job... and he's coming to break your window, at $50 a pane to replace.

Re:RoI

[rolfwind]

Someone who would smash a $1000 computer to gain $1000 for himself is deemed less contemptible than the one would do it for $1 for himself.

I don't see why that is. You're still costing someone $1000, theft, fraud, whatever you like to call it. What the thief makes in end effect should be irrelevant. It's not like Bernie Madoff is a better guy because he got away with only a fraction of what his pyramid scheme stole.

Re:RoI

[Zencyde]

This is a joke, right? Economics are not always about individual profits. We only have so much production capacity and the economy is a way to organize that production. It's like when someone breaks into a car by smashing the window to steal a stereo that they then get, at best, 50 dollars for. So, for a 100+ dollar stereo and a 200+ dollar window repair, that 50 bucks took a lot of destruction to pull out. Overall loss to society? 250+ dollars worth of goods and services. If you were to get robbed in the street and have 50 bucks stolen from you without any destruction required to get it, you'd have suffered a far lesser economic loss for just as much gain on the thief's end. How is this not obvious to you???

Re:RoI

[Zencyde]

You get it, I see. Why aren't you in a power of decision making?

Re:RoI

[interkin3tic]

You're honestly blaming the victim and saying he or she "deserved" it? Jesus, that's some just world fallacy you've got there.

Re:RoI

[Pseudonym Authority]

People who steal food aren't viewed so terribly. Most can kinda empathize with that, if not condone it. If that guy had stolen a CD or something, I bet it wouldn't he would have been punished much more harshly.

If I can reference fiction: Even Jean Valjean was sent to prison because he broke the window, not for stealing the bread.

Re:RoI

[camperdave]

Speaking as someone who has never owned, nor been inside a convertible, I would assume that top up means doors locked also. I imagine that assumption would be fairly common among the general population. So, it would still be slash and grab. I would even expect the occasional lithoclavic or concrete key access (brick/rock through the window). Now, maybe the kind of people who burgle cars know to check the doors to see if they are unlocked.

Re:RoI

[Mashdar]

Right. Because there are no protections against price fixing ;)

In reality, if you have enough insurance companies to choose from, there is a competative market and the companies have to respond to market pressure. Car insurance is a pretty good example of this in most states.

Sadly, market pressure usually involves everyone going straight to the bottom of the barrel, which is conducive to garbage service. (See Airlines)

That said, my experience with my car ensurance company has been quite equitable. My parents thought their payment on a total car was too low and argued it and got ~50% more money. (The original offer was actually equitable in retrospect, but the insurance company caved to have a happy customer.)

I assume you are venting upset over Obamacare, but the real problem is when mandated coverage meets limited provider options. Thankfully Obamacare forces the lionshare of your premiums going to services, so your worst case is paying for Timmy's unnecessary MRI.
As it was, you were paying for all of Timmy's MRI because he was uninsured... At least now Timmy pays in a little bit and goes to the doctor before he's septic.

Re:RoI

[bluefoxlucid]

Because, while I'm manipulative, I am not intentionally deceptive. You'd be surprised what you can get away with when people trust you; it's a valuable tool, and difficult to maintain. Being open and keeping those around you satisfied allows you to work against their direct interests in many cases, and especially to get them to accept risks they are typically uncomfortable with. Deception isn't a skill I ever learned; I control information by controlling relevance and then omitting what is justifiable to omit. Cannot omit strongly relevant things; can omit small details that have no relevant impact but that are worrying when brought up (i.e. people are bad at risk assessment; if the risk of direct impact on anything important isn't of any consequence, I don't need to mention it).

Re:RoI

[SkimTony]

A friend of mine (In the USA) had his car window smashed in by someone stealing his GPS. It was January, and he had a very uncomfortable ride home that night. The kicker? The doors were unlocked. The jerk who stole the GPS could've just lifted the handle, but smashed a window instead.

Re:RoI

[Zencyde]

That still doesn't answer my question. Why hasn't someone put you into a position of authority? Is it because you're not deceptive enough?

Re:RoI

[xelah]

If you believe Bitcoins to be a Jolly Good Thing, you could also consider the benefits imposed on society and not just his private gains. Central banks spend more on creating some forms of cash than they're worth, but it may still be socially useful because the benefit to the whole economy is all of the economic activity enabled by having a means of exchange etc., and not its face value. It'd have to be rather astonishing to reach $561,000, though - not to mention that theft needs to be discouraged and punished anyway.

Re:RoI

[gnasher719]

I'm not sure about that. There was an article in a local paper about someone who did £1,000 worth of damage breaking into a soft-top sports car to steal a pack of biscuits on the seat. The general consensus was that he was a loser and a moron but he got a lower fine than someone stealing £1,000 worth of goods woula have done.

Personally I think he should be punished ten times harder.

Re:RoI

[Anonymous Coward]

Why?

I understand the loss of insurance, but why a fine frr having an unlocked car? If I don't care about homeless people sleeping in my car, why do the police?

Re:RoI

[Anonymous Coward]

While being robbed of $50 on the street may only cost you $50 initially, there will be trauma experienced by the victim. The $250+ dollars to society may actually be a better bargain then the trauma an individual faces after being robbed.

Re:RoI

[Anonymous Coward]

LOL! Muppets...

Re:RoI

[bluefoxlucid]

Do you really think powerful men will allow someone who is out to decrease the money and power in the hands of powerful men to get into a position of power where he can decrease the money and power in the hands of those powerful men?

Politicians will always be able to win debates. Debates aren't about being correct; they're about gaining audience support. Aside from that, look at Ron Paul... remember the #1, #2, and #4 placers of the Republican Nomination or whatever in 2012? I'm not paying attention enough to care about all the details verbatim--and here I go losing a debate where I'm the only participant. But, yes, there was an instance where a news network skipped mentioning the #3 place in delegate count or some such because it was Ron Paul and they didn't want to mention Ron Paul on TV. There was a lot of avoiding Ron Paul, and there were instances where some hosts covered Ron Paul a lot and then suddenly veered away HARD, giving the impression of a lot of pressure coming down from the top.

Why would I ever get into a position of authority? I'm working directly against the interests of the exact people who can stop me from gaining any such position, and I have nothing to bait them into letting me get there. I'd have to run on a platform that sounds good for the people but is bullshit and tows a party line that the party knows only sounds good but really is only good for those in power, such that I'd have the support of the party and they would put faith in that I have the support of the people and thus can be given nominations to positions of power that I can actually win. Then I'd have to veer completely away from all that and do something different, betraying the trust of the people and the trust of the party and unveiling a pile of lies and deceit.

Can't do it.

Re:RoI

[Alioth]

Only *third party* insurance is mandated. Someone stealing your car or someone damaging it to get to the contents is not covered by *third party* insurance. If you want these things to be insured, you need to get theft coverage or comprehensive coverage (which covers damage you do to your car which was your fault). So no, you're not necessarily going to get more than the minimum insurance if you're trying to save money.

In any case car insurance (at least in Britain) is a ruthlessly competitive market. There are many insurers, and most people shop around every single renewal so companies have to work hard to get people to continue to insure with them.

Re:RoI

[whoever57]

You have no idea how mandated insurance works, do you?

What country has requires insurance cover fro your own losses? Most* western countries mandate coverage for 3rd party losses, but not losses incurred by the car owner.

* Note. Many states in the USA require coverage, but the amount of coverage required is so low that the mandate might as well be removed.

Re:RoI

[mcgrew]

You're looking at this like it was a legitimate business, rather than the thievery that it is. This is like coming home to find your central air unit ruined because thieves stole the copper. The thieves net maybe a hundred bucks, you're out ten times that much. It isn't like the bot herders PAID for the electricity and use of the machines, they broke in and stole that electricity.

Re:RoI

[cellocgw]

Personally I liken these muppets to the idiots who steal Henry Moore sculptures and melt them down for scrap!

Oh, I thought those people were called "Folks with good taste." :-)

Re:RoI

[erpbridge]

They had to have been CPU mining... thats the easiest way this could have been done, rather than try to tun a miner to an ATI GPU, and to an Nvidia GPU. SHA256 mining on CPUs is at this point in time so horribly energy inefficient. Even on GPUs its quickly being deprecated.

So it makes no wonder it was using up 561,000/day worth of electricity, and depositing 2000/day of profits. Had they been smarter and made the mine point at a multiswitching pool like multipool.us and mined Scrypt coins , they probably would have made more upwards of 1.5x as much cash CPU mining and used less electricity... or had they done one of the few Scrypt-Jane coins, (and auto-sold to Bitcoin then to USD), a tad bit more still than the Scrypt mining.

Re:RoI

[ComaVN]

I'm not sure about other countries, but in the Netherlands only liability insurance is mandatory for car owners, and those will not pay for any damage to your own car in any case.

Re: RoI

[Anonymous Coward]

So THAT'S what the fox says!

Re:RoI

[PlusFiveTroll]

>But, yes, there was an instance where a news network skipped mentioning the #3 place in delegate count or some such because it was Ron Paul and they didn't want to mention Ron Paul on TV.

An instance? Way more then one.

http://www.youtube.com/watch?v=WR7oBdgazJI

Re:RoI

[Anonymous Coward]

"I would assume that top up means doors locked also. I imagine that assumption would be fairly common among the general population."

You couldn't be more mistaken.

When I was a kid growing up in LA, I had more than one cop tell me to leave my doors unlocked when the top was up.

I can't say I'm terribly surprised by this minor kerfluffle though: once again, /. drags itself - kicking and screaming - out of the Practical Reality camp...

Re:RoI

[drinkypoo]

Right. Because there are no protections against price fixing ;)

The laws are written by the corporations. Please try again.

I assume you are venting upset over Obamacare,

Nope. I think Obamacare will fail, and I think we will never fix the problems with medicine in this country until we remove the corporate profit motive, but it's still better than just leaving everyone twisting in the wind.

In other words, mining for bitcoin is not at all..

[Anonymous Coward]

For it to take over $500k in electricity and to only mine about $2000 worth of coins, there's absolutely no reason to be mining for fish.

Re:In other words, mining for bitcoin is not at al

[somersault]

Except that it must still be profitable to do it with ASICS or whatever it is they're using these days. Eventually that will be a waste of time too.

Trust

[Anonymous Coward]

$2000/day? Sure beats the NSA using bots to do their distributed crypto cracking.

Re:In other words, mining for bitcoin is not at al

[Joining Yet Again]

Capitalism works because it is easy to convince people that they need/want to be exploited.

Well, it's even easier to convince a computer that they "should" be doing something.

Kill the zombies

[Psilax]

Why don't people still not kill the zombie computers when a botnet is discovered and they have control over a Command Server?
In my perspective that would teach the people that security is more important than they realize.
And yeah i know that could kill some essential piece of hardware. And to that my response is. WTF. Why is an essential piece of hardware on the internet and not secure? This isn't 1970 when the internet was 2 computers and they had line of sight to validate trust.

Re:Kill the zombies

[mwvdlee]

Why don't people still not kill the zombie computers when a botnet is discovered and they have control over a Command Server?
In my perspective that would teach the people that security is more important than they realize.
And yeah i know that could kill some essential piece of hardware. And to that my response is. WTF. Why is an essential piece of hardware on the internet and not secure? This isn't 1970 when the internet was 2 computers and they had line of sight to validate trust.

So what you are saying is that you deserve to be punished every time you accidentaly hurt yourself?

Re:Kill the zombies

[Sockatume]

That's like arguing that the solution to a 'flu outbreak is to just kill all the people with 'flu. The benefit gained is small compared to the cost.

Re:Kill the zombies

[Psilax]

if that hurting yourself brings other people in danger, yes.
Some people are that stupid that this is the only way of learning from their mistakes.

I can go and discuss a lot of reasons why this is off course stupid but if people already read my post that means they probably are smart enough to see that this is not realistic with current laws and consequences but hell, somebody had to say it.

Re:Kill the zombies

[gl4ss]

because it would jail them in prison.

simple.

legally it's pretty iffy, since if you said that it was ok to hack command&control and then to do anything you want with them.. would be akin to hacking steam servers and using all the steam clients to do whatever you want.

Re:Kill the zombies

[dimeglio]

For the same reason, drunk driving (or DUI) isn't tolerated on the roads. It's harmful for the entire system, not just to one individual.

Re:Kill the zombies

[Anonymous Coward]

Well, if that essential piece of hardware happens to control a nuclear power plant nearby, I don't care if the nuclear meltdown was caused by hackers intentionally initiating a meltdown, or by well-intentioned hackers trying to kill a botnet. I'd be angry at that asshole which caused the meltdown either way.

And yes, I'd also be angry at the assholes that didn't appropriately secure the system.

Re:Kill the zombies

[Anonymous Coward]

well, some people belong in prison, for example, Bernie Madoff, Jeffery Epstein, Ben Bernanke...

terrible thing, that, squandering electricity!
shux, might as well throw Mark Zuckerbooger, the entire boards of amdocs and akamai... then throw away the key, then make them walk the plank (board), so they can swim (water) with the shark race!

oh shit, i forgot the chances of them swimming to their offshore tax-free data base in the easternmost coast of the medi-terror-annean sea..
oh, nevermind, juST BRING BACK THE CHAIR!

Re:Kill the zombies

[Anonymous Coward]

On the uni network I was plugged into some years ago infected machines were redirected to a quarantine page that said "You are infected. Fix it and tell us about it. After that we'll restore your normal access to the network". I think the quarantining was automated, the unquarantining was not. This could go a long way without breaking machines.

Re:Kill the zombies

[oobayly]

To be fair, killing people with flu would reduce healthcare costs, and would increase the number of jobs available (or reduce the state pension costs if the person is retired). The undertaking business would also boom during Winter months, and inheritance tax income would be higher because people would be more likely to have higher savings due to dying early. Of course it would increase training costs for companies whose employees have been killed, so it's not all good news. Also, it might upset some family members.

Re:Kill the zombies

[Anonymous Coward]

Except they don't fly a helicopter armed with missiles over the average drunk driver to take them out, but instead find other ways to stop the problem.

Re:Kill the zombies

[DrXym]

So what you are saying is that you deserve to be punished every time you accidentaly hurt yourself?

Infected PCs are not just hurting themselves. They're putting an uncessary burden on the PC, potentially compromising any other PC on the same network, and potentially compromising any other person the owner has a relationship with.

At the very least I think ISPs should be well within their rights to disable access to the subscriber if there was cause to believe the machine was infected.

Re:Kill the zombies

[Sockatume]

What a modest proposal.

Re:Kill the zombies

[drinkypoo]

So what you are saying is that you deserve to be punished every time you accidentaly hurt yourself?

If someone steals your car and runs someone over, your culpability is determined by whether you left the car unlocked and the keys in the ignition. Why shouldn't computers be treated the same way?

Re:Kill the zombies

[fredklein]

DUI, per se, that is, driving with a BAC over a certain number, is not harmful. Getting into an accident is harmful. And there is some evidence that people who DUI have a higher chance of getting into accidents.

Of course, there is just as much evidence that being fat/out of shape due to poor eating/exercising habits is harmful. For instance, it takes real time and money to send an ambulance out when you get a heart attack (caused by cholesterol caused by poor eating). Government mandated diets and exercise regimens for everyone!! And the cops should have the right to warrantlessly search your kitchen to make sure you don't have unhealthy food!

Re:Kill the zombies

[bluefoxlucid]

The benefit would probably be there with HIV, especially if we nipped it early on.

Re:Kill the zombies

[Anonymous Coward]

Yes, that's a valid comparison if you're mentally deficient.

Re:Kill the zombies

[X0563511]

No, but they do revoke your privileges to drive...

Re:Kill the zombies

[Xenx]

The wording in most terms of use would put the ISP in the right to do so. The issue is whether they want to absorb the cost of a reliable detection system, and whether they want to deal with losing some customers that would regularly end up being disconnected.

Re:Kill the zombies

[Anonymous Coward]

DUI, per se, that is, driving with a BAC over a certain number, is not harmful. Getting into an accident is harmful. And there is some evidence that people who DUI have a higher chance of getting into accidents.

Of course, there is just as much evidence that being fat/out of shape due to poor eating/exercising habits is harmful. For instance, it takes real time and money to send an ambulance out when you get a heart attack (caused by cholesterol caused by poor eating). Government mandated diets and exercise regimens for everyone!! And the cops should have the right to warrantlessly search your kitchen to make sure you don't have unhealthy food!

No, there actually isn't as much (any?) evidence that being fat/out of shape is as harmful to *the entire system* as the OP stated. But good job trying to rationalize your behavior via a classic Freudian projection.

Re:Kill the zombies

[Anonymous Coward]

The pain is the punishment when you hurt yourself.

Currently with a computer that is infected there is no pain to the owner, there should be. More people should take down botnets and not give a damn if there is collateral damage on the infected systems.

Re:Kill the zombies

[camperdave]

What a modest proposal.

Just like the proposal to institute "daylight saving" time... and we all know how that joke turned out.

Re:Kill the zombies

[Anonymous Coward]

If a child steals my car and ruins someone over, I get blamed for not securing it. If an adult thief steals my car and squash people, he carries all the blame because he is an adult responsible for his actions. Cars are available anyway, it does not matter if mine is an easy grab due to the key being available.

Re:Kill the zombies

[DrXym]

The first question is the interesting challenge and perhaps in some case it would be hard to detect them. I think the second question is a no brainer. I bet most ISPs would happily tell users with infected who were unwilling to clean them to take their business elsewhere.

Re:Kill the zombies

[Anonymous Coward]

Net neutrality, faggot. That's why. Dumb pipe. I can do whatever I want with it.

Re:Kill the zombies

[Anonymous Coward]

There is no license required to use a computer.

Re:Kill the zombies

[X0563511]

There's no license required to drive on a private road, either.

Re:Kill the zombies

[Anonymous Coward]

When they say "kill" the machine I think they mean just to quarantine it from the network until cleaned, not to physically destroy it.

Re:Kill the zombies

[Anonymous Coward]

Why stop with the flu? Killing just about anyone would reduce healthcare costs for society. Your point?

Re:Kill the zombies

[Xenx]

Not every ISP is a major carrier. Rural providers have a limited supply of customers. It would all depend on how much of the ISP traffic is infected crap.

Re:Kill the zombies

[PlusFiveTroll]

Detection is the hard part. There is very little difference between some of these bot nets and legitimate traffic in most cases.

Re:Kill the zombies

[akanouras]

A modest proposal

Re:Kill the zombies

[camperdave]

An Economical Project for Diminishing the Cost of Light

Re:Kill the zombies

[Anonymous Coward]

And you probably won't find the police conducting sobriety checks there either.

Unless you're creating a disturbance anyway.

Figured it out yet?

[Jawnn]

The entire Bitcoin concept is a shiny, hi-tech Ponzi scheme. Those that "invested" by spending CPU cycles (electricty) early made out. By design, no one else ever will unless, of course, they can steal the resources necessary to do the mining.

Re:Figured it out yet?

[Sockatume]

What is it with Slashdot and people using the phrase "Ponzi scheme" to refer to anything they think is a scam?

Yes, Bitcoin mining becomes less profitable over time, because the goal of the system is not to make people money, but to create a sustainable currency. The "gold rush" was engineered in to build up the basic level of hardware needed to make the system useful, and now that there are a lot of bitcoin machines doing transactions we no longer need to hand out a reward for showing up.

Re:Figured it out yet?

[Anonymous Coward]

Ok, maybe ponzi sceme is not the right word... but try this on for scale: Facebook is a pyramid social network, allowing users to create content (a user who "creates", or posts content to facebook then gives over to the pyramidFB all rights to their "creation"). FB then analyses the user-created data, and "monetizes", or sells, bits of it to third parties. Esentially, FB is a scam, and Zuckerbooger is a artist-scammer/scam-artist.

Where does "intelligence" fit into the pyramid, well, for example the NSA,CIA,FBI,DEA, they eat what they`re fed.

Then theres an anomalous actor in the pyramid-sceme, it`s name is "akamai": akamai purportedly copies EVERYTHING, stores it on servers IN EVRY COUNTRY claiming improved access speeds, and when a user from anywhere in the world logs into their FB account, akami then accesses the user-machine. This is invasion.

If the Swiss got their threat-assessment right, they would freeze the akamai bank accounts and servers.

Re:Figured it out yet?

[rich_hudds]

I'm probably being naive here, but without the ability to issue new bitcoins isn't the currency doomed?

If all of the bitcoins have been mined then surely either the currency will collapse, or inflation will be rampant. If inflation is rampant then people will just hoard the coins and the currency will collapse. Also I'm guessing bitcoins will be 'lost' in the same way that gold or paper notes are lost, so long term without the ability to mine new coins the total number is gonna go down.

I might be missing something but I have a feeling that a proper currency probably needs new money. A proper useful currency anyway.

Re:Figured it out yet?

[Anonymous Coward]

It's the same reason every vulnerability is a "0-day" and every time you can't figure out an argument it's a "strawman." Buzzwords make you sound like you know what you're talking about while asking for a definition of a buzzword makes you sound dumb so you're less likely to be questioned.

Re:Figured it out yet?

[Anonymous Coward]

Ponzi scheme - Wikipedia, the free encyclopedia

A Ponzi scheme is a fraudulent investment operation that pays returns to its investors from their own money or the money paid by subsequent investors

A ponzi-scheme is any system that uses the profits generated from new subscribers to pay the promised outrageous return on investment of early investors.

  - Bitcoin user A is an early adopter that mined 1000 bitcoins when they were worthless just a few weeks after launch.
  - Bitcoin user B is a late adopter that bought 1000 bitcoins when they spiked up in value after everything but ASIC mining became unprofitable.

All of user A's profits are a result of user B's entry into the game, with sole except of the "mystery" charges that allegedly get paid out to the computers processing the transaction.

By definition, bitcoin is a ponzi-scheme.

Re:Figured it out yet?

[Anonymous Coward]

If you invested in Bitcoin you are a gambler. But the concept isn't a Ponzi. It's a currency.

Re:Figured it out yet?

[Anonymous Coward]

So it's almost as bad as what we have now with dollars? Just the opposite? Is that what you are saying? Almost, because with BC, the ones who use it are in control. With dollars, bankers and corrupt politicians are in control.

Re:Figured it out yet?

[zAPPzAPP]

Isn't the idea to use it as currency?
There is no 'making out' involved in exchange of currency, just a transfer of values.

The whole printing money out of cpu cycles thing was odd anyways and seemed more like a built in fundraiser/motiviation to get the thing started in the first place.

Re:Figured it out yet?

[X.25]

The entire Bitcoin concept is a shiny, hi-tech Ponzi scheme. Those that "invested" by spending CPU cycles (electricty) early made out. By design, no one else ever will unless, of course, they can steal the resources necessary to do the mining.

For some reason, you seem to only look at BitCoin as some kind of an 'investment' tool.

No wonder you see Ponzi schemes everywhere if fast buck is all you care about.

Re:Figured it out yet?

[Anonymous Coward]

I am not a bitcoin advocate, however I believe our current monetary system with its requirement for growth is closer to a Ponzi scheme than bitcoin.
David Stockman, Reagan's budget director agrees, he actually calls it a Ponzi

See here : https://www.youtube.com/watch?v=uF9UJh8bU70)

Re:Figured it out yet?

[zAPPzAPP]

By that definition any currency which undergoes deflation at some point is a ponzi scheme.

Or really any currency. After all, if no user B ever shoes up to take those dollars from you in exchange of wares, they are worthless.

Re:Figured it out yet?

[Anonymous Coward]

No this does not fit the definition of a ponzi-scheme. B is not buying bitcoins because he expects to make a profit later, but because he intends to spend the bitcoins on goods and services.

Any investment relies on being able to sell it at some point to realize profits from increased value, that does not make all investments ponzi-schemes.

Re:Figured it out yet?

[squiggleslash]

Correct (other than the inflation thing, where you meant deflation). Essentially Bitcoin's "Growth" is (a) engineered to slow down to a standstill in a few years and (b) cannot in any way be related to the growth of the underlying economy. If the economy tries to grow 10% in a year, and would under normal circumstances, assuming there's not already slack in the monetary base, there will not be enough Bitcoins to cover the increased commerce.

About the best you can say about it is that if we had a problem where people are doing too much work, Bitcoins would fix that...

Now, in fairness, I should point out that Bitcoin's defenders here normally argue that it's all OK because what can happen is banks can issue tokens equal in value to a single Bitcoin, backed by a smaller number they'd have in reserve combined with themselves (because they're effectively loans of one bitcoin to the person who takes one.) This is called Fractional Reserve Banking, is used in the real world, works well, and has the itty-bitty problem that virtually all the people who seem to be obsessed with Bitcoins really, really, really, don't like FSB, considering it a form of fraud. It isn't, it's a quirk of accounting, but it's hard for many people to get their heads around as is the fiat money system, so they get upset and start saying "What we need is something backed by something real", "Oh, I know, what about a whole load of computational power that's lost when making the coins", "Yes, great idea, even though it doesn't make sense because you can't turn the coin back into that computational power so it isn't, actually, backed by anything after all", and then this happens.

Re:Figured it out yet?

[Anonymous Coward]

It is impossible for their to be "not enough bitcoins" because they are infinitely divisible (the number of decimal places is determined by computer code).

Re:Figured it out yet?

[Anonymous Coward]

I tried to bitcoin the term Phonzi-scheme but it didn't catch on.

Re:Figured it out yet?

[TheloniousToady]

The "gold rush" was engineered in to build up the basic level of hardware needed to make the system useful, and now that there are a lot of bitcoin machines doing transactions we no longer need to hand out a reward for showing up.

Very good point. But I suspect the "gold rush" also was engineered to make the (still anonymous) originators of the system very rich. It's a beautiful thing to not just discover, but to actually *create* a gold mine, then to engineer it to make the initial gold mining far cheaper than for those who follow. In this case, though, the initial "gold" becomes valuable only after a critical mass of miners shows up.

Re:Figured it out yet?

[Anonymous Coward]

I tried to bitcoin the term Phonzi-scheme but it didn't catch on.

Maybe you'd have better luck with Fonzie-scheme.

Re:Figured it out yet?

[Goaway]

Tell me, would you take out a loan of, say, 100 bitcoins?

Re:Figured it out yet?

[jbssm]

Could say exactly the same about gold and diamonds... heck I could even say the same about printed money. Non basic goods have exactly the value that society as a group accepts they have. This goes for absolutely any non basic goods.

Re:Figured it out yet?

[Anonymous Coward]

Any investment relies on being able to sell it at some point to realize profits from increased value,

Wrong. An investment in a company typically relies on expecting the company to earn a lot of money, from which you get your share. The company itself may, but need not become more valuable in the process. The important thing is that the money you get is more than the money you put in.

that does not make all investments ponzi-schemes.

Speaking of those investments which do work the way you claimed all of them do: Legally they're not Ponzi schemes. However in practice, I'd say many of them are.

Re:Figured it out yet?

[Sockatume]

Yes, that's an issue they'll have to face that fiat currencies do not. It'll be interesting to see what happens, if it lasts that long.

Re:Figured it out yet?

[nedlohs]

If one entity was marketing and selling all the bitcoins and claiming the returns were generated by something else, then sure.

But since that isn't the case it's just a normal bubble. Or just a normal reasonable increase in asset valuation. Depending on whether you think the actual asset in question justifies the increase in value.

Re:Figured it out yet?

[hibiki_r]

Well, it doesn't have most of the characteristics that make a currency work, the main one being that it's inherently deflationary. This is a terrible thing for a currency, due to this psychological phenomenon called money illusion. This makes the monetary base shrink over time, instead of grow, turning said prospective currency into an investment vehicle. It's just natural behavior when something increases its value when you hold it. This makes most of the currency be there as a holder of value than as a method of exchange, increasing the demand of money over time.

Just pick any model of a currency that we have, and insert the parameters required to make it behave like bitcoin, and see what it does. It's not pretty.

Re:Figured it out yet?

[Anonymous Coward]

Go retake macroecon 101.

Re:Figured it out yet?

[Anonymous Coward]

you missed the point of deflation. you'd like to buy a house today for say N bit coins. you KNOW that in a year, there will be *less* bit coins, so the same house will cost N*0.9 bit coins, so you decide to wait (after all, why pass up an opportunity to save 10%?). Then the situation repeats every year. You sit on your money---leading to no economic activity due to deflation.

or lets say you're borrowing to buy that house. say at 10% a year interest. as soon as you borrow the coins, you owe *more* (in real terms) than what you've borrowed---making it next to impossible for you to pay off the debt (after all, the following year you'd owe even *more* in real terms than this year).

Re:Figured it out yet?

[Anonymous Coward]

Sure, with a negative interest rate it would be worth it.

Re:Figured it out yet?

[Prof.Phreak]

if no user B ever shoes up to take those dollars from you in exchange of wares,

The issue with deflation is that YOU wouldn't give away dollars in exchange for wares. If you know your dollars will be worth more in the future, there's no reason not to sit on them and do nothing. (e.g. why invest and take risks when your dollars [err...bitcoins] are worth more every day without you doing anything!?).

Re:Figured it out yet?

[BlueMonk]

I think you need to review the purpose or meaning of having a currency "backed" by something. The whole point is that the real value is in the scarcity of the currency or resource backing the currency. Anything that is truly scarce can "back" a currency because it represents an expenditure of resources that can't be counterfeited. This is why gold has value. Mining gold takes resources (time, transportation, and exposition of which are the most difficult to come by -- merely finding the gold) which you never recover, but the gold itself is the valuable asset that backs itself and/or other currencies. Bitcoin, then, could be viewed similarly. You spend the resources to acquire a new bitcoin by "mining" it, which you should never expect to get back, just like you can never expect to get back the time and other resources you spend to mine gold. Bitcoin, like gold, retains its value in its quality of scarcity. You can't get another one without expending resources relative to its value. That's why the existing bitcoins retain their value and new bitcoins add value to the bitcoin economy. They don't need any external backing because they are scarce and represent a past expenditure of resources, just like gold.

Re:Figured it out yet?

[bluefoxlucid]

The problem with Fractional Reserve Banking is that there is no real money. Fiat currency is by nature imaginary; but in this case fiat currency isn't printed and spent into the economy, but rather loaned into existence. That means every piece of currency in existence is basically owed to someone else, with the caveat that it's probably not in the hands of the debtor who owes it to said creditor.

On top of this, loans necessarily incur interest, meaning more money is required to pay off the loan than borrowed, meaning inflation, meaning that every piece of currency that comes into existence causes inflation and immediately creates a need for more currency to come into existence at a later date. It's not that predictably later we will need more currency because of another action, but that the event of currency becoming accessible creates the situation that more currency needs to be made accessible.

In essence, each unit of currency loaned into existence causes inflation by increasing the money supply ("printing money") and by increasing the amount of money owed (monetary demand to pay off the interest). We operate on a negative currency system, where the system becomes more and more poor as the amount of currency increases. Our entire economy is continuously indebted, and the growth of the money supply is accomplished by the growth of debt and the continuous loss of wealth.

Re:Figured it out yet?

[BlueMonk]

Doesn't that just mean that the interest rate is bad. 10% per year on a currency in deflation is ridiculous. The interest rate on such a currency should be 0% or less because the mere fact that the currency is gaining value would represent its own interest.

Re:Figured it out yet?

[Sockatume]

By your definition, all startups are Ponzi schemes. To make the necessary correction:

A Ponzi scheme is a system where only the revenue added by new subscribers pays the return on investment of early investors.

Re:Figured it out yet?

[BlueMonk]

Saying that you owe more than you borrowed in real terms doesn't introduce anything new into the financial services economy. Everyone is charging interest to make money, which means you always owe more than you borrowed. How does anyone pay off their debt with interest? They have to earn it from outside sources.

Re:Figured it out yet?

[Ash-Fox]

Seems like a pyramid scheme to me.

Bitcoin mining becomes less profitable over time, because the goal of the system is not to make people money, but to create a sustainable currency.

Or the goal is to make the original creator involved rich, like other schemes.

and now that there are a lot of bitcoin machines doing transactions we no longer need to hand out a reward for showing up.

Or maybe they do, because with out them...

Re:Figured it out yet?

[Anonymous Coward]

Give it to you at 0%? Why would I do that unless you're my best buddy? Bothering with all the book-keeping and shit, when I could just keep it in my vault and look how it gains value on its own!

And I'm not even talking about negative rates...

Re:Figured it out yet?

[omnichad]

Do you know anything about what you're talking about? Facebook is not pyramid-shaped. The one group at the top makes all the money - no promises of money for anyone else. Yes, the everyday user of Facebook is not the customer - they are the product. But that's only a small change to advertiser-supported content going back to the golden age of television.

Akamai is hired to help distribute data. If you feel "invaded" by being directed to Akamai for faster content on Facebook, then your blame should fall on Facebook for hiring them. Akamai doesn't access your machine - your machine submits a request to their machine, which is fulfilled. It's doing what you're asking it to (in proxy for Facebook).

Re:Figured it out yet?

[IamTheRealMike]

This crap is so old it's actually mentioned in the bitcoin FAQ:

http://bitcoin.org/en/faq#wont-bitcoin-fall-in-a-deflationary-spiral

There is lots of academic research that indicates the "deflationary spiral" doesn't happen like that.

Bitcoin having a fixed final size is just fine - it means when the economy grows, everyones money becomes worth a little bit more, i.e. prices fall a bit. Things get cheaper. That's sort of what you expect from progress, isn't it?

Re:Figured it out yet?

[Ash-Fox]

B is not buying bitcoins because he expects to make a profit later

I actually know a few people who are mining Bitcoin because they expect to make a profit.

Re:Figured it out yet?

[omnichad]

I think this chain of jokes has jumped the shark.

Re:Figured it out yet?

[JesseMcDonald]

If the economy tries to grow 10% in a year, and would under normal circumstances, assuming there's not already slack in the monetary base, there will not be enough Bitcoins to cover the increased commerce.

It's not the amount of currency in circulation which needs to increase, just the value of the currency. If the economy grows 10% in a year and the number of bitcoins is fixed then each bitcoin will be worth 10% more at the end of the year. The people who saved their money—who deferred consumption, and thus helped the economy to grow by 10%—have 10% more purchasing power, corresponding to the 10% increase in available goods.

None of this has anything to do with Fractional Reserve Banking, which, as you say, is merely an accounting quirk: a way for banks to have more outstanding claims for money on demand than they can actually satisfy. Any bank practicing FRB is technically insolvent, but that doesn't quite cross the line into outright fraud as long as your customers are aware of the situation.

There is nothing to prevent a bank from offering FRB bitcoin accounts, but the level of reserves required depends on the degree to which the bank can keep transfers confined within the system. I don't see very much incentive for people to leave their bitcoins in bank accounts and accept off-blockchain account-to-account transfers in place of actual bitcoins when an encrypted private wallet offers a similar or greater degree of security and convenience.

Re:Figured it out yet?

[Tom]

Bitcoin uses a different philosophy. The below is pretty rough, as I've just started to understand it all myself.

Fiat currencies as we have them right now are unlimited money related to limited resources. If the number of goods in the economy grows, the money can grow as well, keeping it balance. But it doesn't have to, it can also grow slower or faster. In general, it grows faster, creating inflation.

Gold or other backed currencies were limited money related to limited resources. They would grow if the amount of gold (or whatever) grew, so the expansion of money was largely unrelated to the changes in the overall economy, which is pretty bad, but worked for a while because the amount of gold was not growing or shrinking dramatically. Until the spanish hauled it home by the boatload from the New World.

Bitcoin is the strange new beast: A limited amount of money related to a limited resource, but with a well known growth potential and limit. While also unrelated to the currency, this means that it is not erratic. It also tends towards deflation rather then inflation. Once the financial sector, which is built entirely on inflation, catches on, I wouldn't be surprised if there were a couple of fatal accidents. Bitcoin isn't undermining any particular currency, it is undermining the currency system.

And yes, the economic danger with Bitcoin is that as it becomes more valuable over time, hoarding it can be more profitable then investing it. Our current economic system is fueled by inflation because for the rich, investing is more profitable than being Scrooge McDuck. However that same system continuously shafts the non-rich, i.e. the 99%. If we had constant deflation instead of constant inflation, saving up for your retirement, or house, or car, would be so much easier.

Imagine you had started to work in 1950. You'd be about ready to retire. The accumulated inflation between 1950 and today is 870.4%. The first years of savings you may have accumulated are worth about 10% of what you put in today. Interest is the only thing saving your day. The game worked well for a couple decades, but interest rates have been laughable for a decade now with inflation staying largely constant.

Make no mistake. Inflation is not your friend if you aren't super-rich. A currency that won't inflate will have a dramatic impact on our economic system. What exactly remains to be seen, but at least the old games won't work anymore.

Re:Figured it out yet?

[JesseMcDonald]

The issue with deflation is that YOU wouldn't give away dollars in exchange for wares. If you know your dollars will be worth more in the future, there's no reason not to sit on them and do nothing.

Here's one reason: you need the wares now, not later. We've had continuous price deflation in the area of electronics for decades, and it hasn't prevented people from buying the new iPhone 5 just because they know there will be an iPhone 6 next year for the same or lower cost.

As for investments, sure, some ventures with a positive, but below-deflation, return will be unlikely to receive funding due to deflation. However, that's a good thing: such investments are really malinvestments, diverting capital away from more profitable ventures. If you can't find an investment with an expected rate of return above the rate of deflation, then both you and society are better off with you holding onto the money and accepting the default rate of return for merely deferring consumption rather than actively directing effort and resources into a below-average investment.

Re:Figured it out yet?

[Anonymous Coward]

Also, while it's true that we "wasted" computational power while generating the bitcoins, we have to understand that all that computational power was used to strengthen the reliability of the system's logbook (i.e. the blockchain). The way it is now, each time a coin is generated, we are adding more and more mathematical means of proof that the information in the logbook has not been corrupted, and that all wallets have the right amount of "credits".

Re:Figured it out yet?

[Anonymous Coward]

It's gonna be deflationary when the last block is generated, in 2100.

Re:Figured it out yet?

[Anonymous Coward]

Isn't this the same thing as bitcoin?

The coins themselves are worthless, and the bulk of them were mined easily. Now comes the part where any increase in actual value comes from people paying in via real money.

Re:Figured it out yet?

[Hatta]

virtually all the people who seem to be obsessed with Bitcoins really, really, really, don't like FSB, considering it a form of fraud. It isn't, it's a quirk of accounting

What's the difference?

Re:Figured it out yet?

[camperdave]

In essence, each unit of currency loaned into existence causes inflation by increasing the money supply ("printing money") and by increasing the amount of money owed (monetary demand to pay off the interest).

Maybe it does cause inflation, and maybe it doesn't. The key factor here is that currency is the medium of exchange of wealth (goods and services). If the interest rate is less than the growth of wealth, you get a situation where the goods per dollar rises - deflation. If the interest rate is higher than the growth of wealth, you get a situation where the goods per dollar falls - inflation.

Re:Figured it out yet?

[Anonymous Coward]

Apparently I was happy enough with my current circumstances to not really need a new house. Using up resources just for the sake of "economic activity" is dumb and should be discouraged in general. Unfortunately we live multiple generations into a gigantic ponzi scheme based on the idea of ever increasing economic activity so just suddenly stopping would not be pretty.

Re:Figured it out yet?

[bill_mcgonigle]

Interest is the only thing saving your day.

It also sucks money out of local communities. Put your money into the local S&L for community lending paying 1.5%? No way - with real inflation over 6%, you send your money to Wall Street (either directly or with a 401(k)) or you're going to lose money every year. S&L paying 4.5% while inflation is under 1%? Sure thing, that's an easy way to park some cash. ... and "somehow" there's no money for loans to small businesses anymore.

Running the printing presses at a high speed only helps exacerbate the problem, but it's systemic. You can see the rise of the 401(k) system shortly after the 1971 switch to fiat money and the resultant rampant stagflation, but, again, that's symptomatic.

that same system continuously shafts the non-rich, i.e. the 99%

Absolutely, and by design.

Re:Figured it out yet?

[Anonymous Coward]

The people who saved their money—who deferred consumption, and thus helped the economy to grow

First, WHAT? Spent money _IS_ the economy.

Second, if bitcoins are worth significantly more over time, why would anyone lend money? Good luck running a healthy economy in that currency.

Re:Figured it out yet?

[Yunzil]

You'll forgive me if I don't take the word of bitcoin.org when discussing problems with Bitcoin.

Re:Figured it out yet?

[BlueMonk]

Yeah, 0% and negative interest rates would be pretty ridiculous. But so is the notion that when you're repaying loan you're not paying more than you borrowed anyway. Loan repayments always entail extra cost beyond what was borrowed.

Re:Figured it out yet?

[radarskiy]

"This is why gold has value. Mining gold takes resources (time, transportation, and exposition of which are the most difficult to come by -- merely finding the gold) which you never recover, "

Productive of unity or less means the Industrial Revolution did not happen. Good luck with that theory.

Re:Figured it out yet?

[radarskiy]

Considering that fraction reserve banking predates fiat currencies, why do you think that fractional reserve banking requires a fiat currency?

Re:Figured it out yet?

[BlueMonk]

What do you mean? Are you talking about the value of something produced being less than that invested to produce it? It may be stupid, but people are spending more resources to produce bitcoins than they are worth. That doesn't mean bitcoins aren't retaining their value. It just means people are wasting resources acquiring them. Do you disagree the the resources expended in mining gold are never regained?

Re:Figured it out yet?

[bluefoxlucid]

The US is on a fiat currency, so this is relevant. Backed currency is irrelevant here.

Re:Figured it out yet?

[JesseMcDonald]

Spent money _IS_ the economy.

No, goods and services are the economy. Money is just a placeholder, and the act of spending money is merely a rearrangement of goods. Neither are essential; the economy can exist without money, albeit less efficiently. But before you can spend, both you and others must have produced and saved in order to have goods to trade.

It is consumer demand, the desire for consumption, which drives the economy, not consumption itself. Between desire and consumption lies production. Production exists in response to demand, and in turn enables consumption. In order for the economy to grow the capacity for production must increase, which requires saving and investment. The returns from saving (in a deflationary economy) and investment provide the effective consumer demand for the extra goods being produced.

Second, if bitcoins are worth significantly more over time, why would anyone lend money? Good luck running a healthy economy in that currency.

You would lend money because you expect to get back more bitcoins than you lent, obviously. You wouldn't lend only to get back less, even if they're worth more than the larger number you started with, because you could have just held on to the original bitcoins for an even better ROI. That's good, since only below-average investments would have a negative nominal return, and you wouldn't want to bring down the average. (With a fixed currency supply, the rate of deflation matches the average "risk-free" ROI.)

More investment is not always better, particularly when it diverts resources from better investments. With a deliberately inflationary currency this sort of malinvestment is much harder to identify.

Re:Figured it out yet?

[Anonymous Coward]

Well, it doesn't have most of the characteristics that make a currency work, the main one being that it's inherently deflationary.

So no currency ever worked back when they were all backed by silver and gold?

Just pick any model of a currency that we have, and insert the parameters required to make it behave like bitcoin, and see what it does. It's not pretty.

Since one of those parameters is "this currency is 100% optional", I agree completely.

Re:Figured it out yet?

[Anonymous Coward]

Excellent, then you'll make a great bitcoiner! We're not asking you to take anyone's word for anything - check the math, check the econ, check the source. The official web page just describes a consensus.

Re:Figured it out yet?

[Anonymous Coward]

They argue for FRB of Bitcoin? Just threw up a little in my mouth.

It's supposed to deflate.

BC can be divided to 8 decimal places now, and assuming it actually became a problem it's at least theoretically possible to make them infinitely divisible, so if they do become incredibly useful "running out" isn't likely to be the problem.

Trying to graft fractional reserve banking onto a system that enforces a hard limit and universal transparency on the entire currency would make someone, at best, an unintentional scam artist, and all their clients morons.

Can you actually imagine accepting a stand-in BitCoin? "Hey, I don't have any actual BitCoins to send you, but I'm sure the guy who gave me this circular peice of plastic will totally buy it back from you for face value, assuming he hasn't handed out too many..." With banks and credit cards there's actual inflation, federal insurance, and the government's ability to print money if it gets down to it. Not so much with BC.

Re:Figured it out yet?

[Anonymous Coward]

You'll forgive me if I don't take your strawman argument seriously.

Re:Figured it out yet?

[guises]

It's a pyramid scheme. As you said, a Ponzi scheme requires investors and a central figure who is taking money from those investors.

Re:Figured it out yet?

[Andtalath]

Could you point me to some such resource?

Because that sounds very, very, illogical.

Re:Figured it out yet?

[Andtalath]

Err, so you are saying that bitcoin value isn't increasing?

Re:Figured it out yet?

[Goaway]

Not to the lender, it wouldn't. Nobody is ever going to lend at negative interest rates, no matter how deflationary the currency.

Re:Figured it out yet?

[Copid]

Interest is the only thing saving your day.

What you're really saying is that rather than hoarding the medium of exchange, you're stuck loaning it out or investing it directly so it can be used productively to grow the economy. That doesn't sound like much of a tragedy.

The flip side to your ideal world with constant deflation is that it gets kind of hard to borrow money to start a new business. If the deflation is constant, you have to make sure that your investment pays off more than simply having your potential lender roll around naked in it. If it's unpredictable (which Bitcoin sure as hell is and probably always will be), you could simply be ruined because the real value of your nominal debt skyrocketed unexpectedly.

If people want to use Bitcoin for exhange, I'm all for it, but it just isn't fit to be a major currency.

So, a public/private partnership

[Anonymous Coward]

Sounds like practically any of those. Stick the public with the losses, give some company the profits. Only the scale is lacking. To play in the big league, they'd have to do billions of damage to create millions of profit.

Re:In other words, mining for bitcoin is not at al

[Anonymous Coward]

At which point either the value of a bitcoin will increase to approximately the cost to produce it (driven by scarcity of bitcoins otherwise) or the scarcity of bitcoins will lead to people stopping use it and it will die.

Re:In other words, mining for bitcoin is not at al

[Joce640k]

A few months ago I mentioned that botnets would be used for bitcoin mining and everybody was all over me saying it could never work because people would be suspicious of their machines running at 100% all day and start running scans. Yet here we are...

(deflation)

[AC-x]

You're thinking of deflation, not inflation which is the opposite.

Re:In other words, mining for bitcoin is not at al

[Anonymous Coward]

A few months ago I mentioned that botnets would be used for bitcoin mining and everybody was all over me saying it could never work because people would be suspicious of their machines running at 100% all day and start running scans. Yet here we are...

No, no-one except for a troll was all over you, to everyone else that was obvious and they didn't care about your post.

Re:In other words, mining for bitcoin is not at al

[Anonymous Coward]

Seeing as how there will eventually be ~21 million bitcoin in existence, and each of them divisible to eight decimal places into the smallest unit of account (the satoshi), it's hard to understand how there could ever be any "scarcity of bitcoins".

That's one huge amount of units of account...

Numbers

[Anonymous Coward]

"ZeroAccess was using $561,000 of electricity a day on infected PCs, to generate about $2000 worth of Bitcoin."

Inaccurate. Conceivably these machines are powered on would be consuming electricity even if not infected.

The actual impact is probably more lost productivity for users who experience delay on the machines and thus take longer to do whatever they are trying to do.

Re:Numbers

[Anonymous Coward]

It's been a very long time since a PC consumed a constant amount of power no matter what it is doing. Today a PC running at 100% CPU or GPU is using -more- power than a PC sitting on but idle. The processors don't even run at the same clock speed when they're idle any more.

Re:Numbers

[nedlohs]

The rest of us upgraded to computers that use more power when they work harder than when they are idle long, long ago.

And thus if something causes my computer to do any extra work that will result in more power consumption than otherwise. It doesn't make a different whether that also slowed down the work I was doing on it or whether the machine was completely idle at the time (well the former case may cause even higher power consumption if it triggers lots of swapping, etc).

Re:In other words, mining for bitcoin is not at al

[DrXym]

It's fairly obvious that botnets could be used for mining.

For that matter, any popular website could be used for mining via page hits e.g. a site could throw a hash computation into every page served, store the result in a cookie and return the result with the next request. It'd probably happen so fast people wouldn't even notice their CPU cycles being stolen. Perhaps some sites are already do this.

Re:In other words, mining for bitcoin is not at al

[Joce640k]

Bitcoins will only be desirable so long as people can get them for 'free'.

After that, what's the point? It's just another exchange medium. Not going to revolutionize anything.

numbers perspective

[Anonymous Coward]

a cheap home pc such as you might find for $400-500 at walmart might draw a max of 120 watts under full load, have the cpu power that might reach that of a quad core athlon, and won't have a discrete gpu... fine for surfing the internet or doing school work, but it is not a bitcoin mining powerhouse. that system at a utility cost of $0.15/kwh would generate less than $2.00 worth of bitcoin in a year (at a rate of about 11 mhash/sec, and current estimated exchange of $133 ea) while costing around $150 to operate during that time.

the current difficulty of mining has made ordinary home pc worthless for mining... and is why the electric costs estimated by symantic look so far fetched compared to amount of bitcoins generated by the botnet.

Re:In other words, mining for bitcoin is not at al

[Joce640k]

The assertion was that botnets were more valuable for doing other things, that drawing attention to yourself by mining (using 100% CPU) was counterproductive.

Another story about Bitcoin and illegal acts

[kaizendojo]

When will we see a postive story about Bitcoin's usefulness? Oh right, there really ISN'T any news on that front.

Re:Another story about Bitcoin and illegal acts

[JesseMcDonald]

When will we see a postive story about Bitcoin's usefulness? Oh right, there really ISN'T any news on that front.

There is news on that front; it just doesn't get reported here as often.

• Honolulu-based Tealet using Bitcoin to expand international business
• Online game developer Bigpoint's 330m users can now buy virtual goods with bitcoins
• BitWall Allows Publishers To Make Money Through Bitcoin Micropayments
• Bitcoin recognized by Germany as 'private money'

Re:In other words, mining for bitcoin is not at al

[h4rr4r]

I believe he means scarcity of minable bitcoins. Once you can't mine them why would I or anyone not already in on the scheme want in?

They can be divisible to 1000 decimal points, if the only way in is to buy something you generated for a couple cents of power for real money I won't bother.

Re:In other words, mining for bitcoin is not at al

[TheRealMindChild]

The deal is with CPU mining, they are SO SLOW that even one unit of work done is almost definitely stale by the time it is submitted. That is, it is no good.

Assertion error.

[Anonymous Coward]

" (using 100% CPU)" is a risible and ridiculous assertion. Maybe those who ridiculed you were doing so because of that fatuous and ignorant assumption.

Re:In other words, mining for bitcoin is not at al

[Anonymous Coward]

You'd probably waste more on developing and maintaining this than it would ever pay back with current rates.

Google gets several billion page hits _per day_. A BtC mining script on your puny blog will get you a million hashes daily. A modern ASIC miner calculates tens and hundreds billions hashes _per second_.

Re:In other words, mining for bitcoin is not at al

[omnichad]

That might be true - if they can get a binary onto your system that uses CUDA, that doesn't show up as 100% CPU usage at all. But you might as well use 100% of the CPU as well. Put it at the lowest priority but eat every remaining cycle. Look for taskmgr.exe and decrease production when that task is running.

Dissapointed

[SleazyRidr]

Being only vaguely familiar with hacker jargon, I was expecting an actual sinkhole: in the ground, into which computers were literally falling.

This is why I am unimpressed with BitCoin

[SkimTony]

Because, as has been demonstrated here, the economics of producing bitcoins mean that there is a huge incentive to use stolen resources to produce them. Secure currency? No, just another incentive to create botnets.

Re:This is why I am unimpressed with BitCoin

[ub3r n3u7r4l1st]

The introduction of ASIC mining have made botnet obsolete.

Re:This is why I am unimpressed with BitCoin

[GlennC]

The introduction of ASIC mining have made botnet obsolete.

Only if I use MY processor, electricity, etc. to mine coins.

If I use SOMEONE ELSE'S, I get "free" bitcoins...not to mention use of the botnet for spam, DOSing and any number of other money-making activities.

Re:This is why I am unimpressed with BitCoin

[Anonymous Coward]

Because, as has been demonstrated here, the economics of producing bitcoins mean that there is a huge incentive to use stolen resources to produce them. Secure currency? No, just another incentive to create botnets.

That is even more retarded than saying that car producers promote car theft by asking money for their product. 100% Troll.

Re:This is why I am unimpressed with BitCoin

[SkimTony]

In what way are they obsolete? Yes, the custom ASICs can mine bitcoins much faster and more cheaply than general purpose CPUs, but if you're not paying for the resources to use them, that's irrelevant.
Suppose I have a mine where I can pull $10,000,000 worth of gold out of the ground every year, and that operation costs me $9,999,000 to run (this would be crazy for real gold mining operations, but seems about right for BitCoin mining, and is by design). I make $1,000. By comparison, you can steal $100 worth of gold jewelry per month, and have no chance of being caught.
In this situation, despite the fact that my operation generates far more currency, you come out ahead $1,200 vs. $1,000). ASICs obsolete paying for traditional CPUs to do the math, but if you steal the resources, you will still make a much larger profit.

Re:This is why I am unimpressed with BitCoin

[Anonymous Coward]

ub3r n3u7r4l1st? More like ub3r bi7c0int4rd.

/. - home of best economists!

[Anonymous Coward]

"Deferring consumption" is what makes economy grow and that's why you deserve a bigger slice of pie for doing nothing, really now? Silly me, I thought things like building plants, mining ore, growing wheat and making inventions is what makes economy grow.

But thanks to you, now I know! Everyone should stop buying anything except for bare necessities and see the economy skyrocket by the power of all that consumption deferred.

Re:/. - home of best economists!

[JesseMcDonald]

"Deferring consumption" is what makes economy grow and that's why you deserve a bigger slice of pie for doing nothing, really now? Silly me, I thought things like building plants, mining ore, growing wheat and making inventions is what makes economy grow.

You already did all that; it's why you have money in the first place. You can offset the positive effect of that production immediately through consumption, or you can leave a surplus for a time (deferring consumption). That surplus—not the money, which is only a proxy, but the goods produced to earn it—can then be invested by yourself or by others in profitable ventures which fuel additional growth. If you simply hold on to your money rather than purchasing something with it, that gives others the opportunity to purchase those goods instead, at lower prices. Essentially, you're loaning them your purchasing power. The increase in value from deflation is your interest on the loan.

If people don't understand even this much, it's no wonder the economy remains a mystery to them.

But thanks to you, now I know! Everyone should stop buying anything except for bare necessities and see the economy skyrocket by the power of all that consumption deferred.

Essentially, yes. If we did stop buying goods for immediate consumption then all our productive capacity could be applied to capital goods. With more capital (i.e. more and better tools), a given investment of labor and materials would produce more than they used to, making people comparatively wealthy.

Obviously people aren't going to defer all their consumption; we have needs and wants which are better satisfied now rather than later, even if they would cost less later. There is a balance to be achieved. However, the people who do choose to defer part of their consumption improve matters for everyone, and fully deserve the increase in purchasing power which accompanies the resulting economic growth.

Re:/. - home of best economists!

[Anonymous Coward]

And what magic pixie dust's paying for "more and better tools" when nobody buys your goods?

Money you receive for your work don't represent some sort of credit on consumption - they represent value of work _you_ did, that's it.

If it's too hard to understand, try a mental experiment - reduce the society to 3 people and 5 coins in existence and think what happens when one of them just puts every coin he gets for selling his goods in his coffer.

Philistines

[Latent Heat]

One likens such thieves to the Biblical Philistines.

The account is that the Israelites received Divine Punishment For Something that the Ark of the Covenant was captured by their enemy, the Philistines.

Now the Ark didn't do much good for the Philistines either. I guess they took it as a war trophy or because it was kewl, but they didn't believe in the religion behind the Ark so their possession of it was a sacrilege. In the Hollywood movie, the Ark melted the faces of the Nazis, who coveted the Ark but they weren't Good People who would benefit from the Ark. What happened to the Philistines? Depending on the translation, they got rectal lesions -- hemorroids or even rectal cancer, depending on whom you believe.

So if a thief, say, swipes 100 dollars, you are 100 dollars poorer and the thief is 100 dollars richer. Suppose the thief swipes your prized vinyl record collection. To you, the collection was beyond value, irreplacable 60's vintage recordings in their original jackets. To the thief, let's say the thief gets only 1 cent on the dollar "for that junk." That thief took something of value from you but did not obtain anything of value to him. That thief is a Biblical Philistine.

Global warming

[Anonymous Coward]

The $2,000 must not be compared to the $561,000, but to the cost of developing/acquiring the botnet.

THIS. This is why bitcoin should be outlawed. It's a runaway train of wastefulness that ends with the destruction of our planet. Imagine burning $561,000 in gas to go to work and earn $2000. This is what happened. The world is going to end because of this shit. For the love of Gaia, STOP BITCOIN NOW!!!

Re:Global warming

[Delusion_]

I played a bit with a miner on my computer for a while just to understand Bitcoin a little better. I calculated the difference in electricity use between my computer idling and mining. Even ignoring hardware cost (it was already bought for other purposes, after all) and only calculating the DIFFERENCE between idle and mining (the computer is always on), projected profits on the mining didn't even cover the difference in electricity usage, and my electricity costs aren't high.

Part of this has to do with the price of Bitcoins at the time, but more of it has to do with the fact that even high-end NVIDIA cards are bad choices for Bitcoin miners.

Presumably, most computers in such a botnet aren't running high-end AMD video cards, and many of them are going to be office computers and inexpensive home desktops and laptops without a dedicated 3D video card. Mining in CPU mode is laughably pointless. Less so if you're not paying for the electricity.

Like you, I'm not convinced Bitcoins do more good than harm, strictly based on being a semi-fiat currency whose backing is, effectively, electricity waste.

Re:In other words, mining for bitcoin is not at al

[Joce640k]

I'd notice the fan noise...

Re:In other words, mining for bitcoin is not at al

[omnichad]

Yes - and you probably would never get infected in the first place. We're not talking about people quite as smart.

Cause property damage is not stealing.

[denzacar]

Get little overexcited pressing that elevator button too hard and you can cause property damage that may end up costing the owner hundreds of dollars in repairs.
You may not have had that intention but they got you on camera and they're gonna sue.

On the other hand, if they got you on camera stealing money or goods of the same nominal value - they'll just call the cops on your ass.
Cause it's a completely different situation.

People tend not to accidentally steal other people's property.
But people tend to want to be reimbursed for the damage that other people do to their property.
Accidentally or not.

Re:Cause property damage is not stealing.

[spire3661]

Bad example. Unless you can prove I pushed the button in a way that would not be considered normal, you have no case. Public buttons are expected to wear out and be replaced.

Bitcoin is a new age democratic, decentralized...

[ub3r n3u7r4l1st]

currency that free the civilization from the scam master that is the Federal Reserve.

Re:In other words, mining for bitcoin is not at al

[Anonymous Coward]

Newsflash:
Botnets have been used for bitcoin mining for well over 2 years.
Botnets do incur higher attrition rates while mining, about 3x-4x normal for the 2 small-ish (30-50k zombies) nets we have stats on.
Botnet herders are capable of doing basic math, if extra income from mining > value of the x% extra zombies lost per day, they'll do it.
What's somewhat suprising is that there's still botnets mining bitcoin, most switched to scrypt based altcoins a while ago.

Re:In other words, mining for bitcoin is not at al

[Anonymous Coward]

"Once you can't mine them why would I or anyone not already in on the scheme want in?"

Because it's less expensive to use than VISA? Because it's more secure? Because - properly used - it can be anonymous (which is only true of cash in F2F transactions - and discounts the person you're dealing with)? Because it can't be either debased or controlled by governments? Because it completely eliminates buyer fraud, for merchants? ...and a million other reasons.

Or are you trying to say that you don't think you can make an exorbitant profit? Which was never the point - you would understand that if you'd done even minimal research, or read any of Satoshi's White Paper - but OK. You can make that profit more easily by just buying bitcoin and sitting on them. Really. Mining is a very specialized endeavor, these days; and no longer for dilettantes. But the profit is roughly the same under the assumption that it keeps on keeping on - and taking bitcoin as a commodity - whether you buy it or mine it. You can't screw up buying it though, whereas the pitfalls of mining are legion.

Is it relevant

[nanospook]

Does the stats on electricity cost really apply? If those PC's are not infected, wouldn't they be using the electricity anyways? They are not on for the bot. The bot just infected them for it's own purposes.

Re:Is it relevant

[VortexCortex]

You don't understand. The Bot Masters stole that much in electricity. The government wants to prosecute their charred corpses.

Re:Is it relevant

[Anonymous Coward]

CPUs use more electricity when they are working, than when they are idle.

For casual users of email, web, etc, their CPU would normally be idle 95% of the time. When infected however, it's running at full load.

*ALL* bitcoin mining is a waste of energy

[Anonymous Coward]

unless you're generating your energy via solar power or human power where you might get a nice work-out out of it, you're reducing the life of your equipment, and you're spending electricity at a far higher rate than other more valuable work that could be done on the same system. ( or with that electricity )

Wasteful Bitcoin Mining

[Trogre]

Saying "wasteful bitcoin mining" is a little redundant, like "round circles" or "avian birds".

Oh, so now we're supposed to care?

[Anonymous Coward]

Why is this particular example of externalized costs important? It's still a better ROI than Haliburton got on the Iraq War, but I don't see society being in any hurry to string up Dick Cheney. Forget about coal billionaires and global warming, get those nasty botmasters!

Re:In other words, mining for bitcoin is not at al

[h4rr4r]

Visa costs me nothing to use, in fact I get paid for it. It can easily be controlled by governments by banning exchanges and deflationary currencies are bad.

Security is why I hear about those losses at bit coin exchange?

I don't see the mining as having had a value I want to pay for. If I could exchange money without enriching the miners I would be more likely to use it. If not I might as well get into litecoin or whatever.

Contemptible-ness

[GPS Pilot]

"Contemptible-ness" should be, and is, proportional to two variables: how much the thief stole, and how much damage was done in the process.

Nevertheless, it's understandable if you shake your head when you hear that the victim's losses were £1,001, while the thief's gain was only £1.

Just the opposite

[GPS Pilot]

If you anticipate inflation, it's in your interest to trade your currency for something that's less likely to lose value. Hyperinflation meets my definition of "collapse" of a currency.

If you anticipate deflation, it's in your interest to convert goods into currency that's likely to gain value (i.e., to hoard currency). A currency that's gaining value can hardly be said to have collapsed.

Deflation happens when the supply of a particular currency doesn't grow fast enough to meet the demand for that currency.

No disrespect, but how did your post get +5 Insightful?

Re:Just the opposite

[rich_hudds]

No disrespect, but how did your post get +5 Insightful?

I guess people understood what I meant even if I said inflation rather than deflation.

Taking ten hours to point out the same error that other posters had covered, and using rather inelegant prose (i.e, to write badly) to do it probably explains your post's score.

Fixed supply of Bitcoins is not a big problem

[GPS Pilot]

there will not be enough Bitcoins to cover the increased commerce

Sure there will, unless somebody tries to impose price controls that prevent Bitcoins from gaining value (i.e., that prevent deflation from happening). Deflation is the natural and proper response when the supply of a particular currency doesn't grow enough to meet the demand for that particular currency.

And if some entrepreneur introduces yet another currency, whose supply is more responsive to demand, that too is a natural and proper response.

Is the difficulty of minting new Bitcoins set in stone? Maybe it could be relaxed a bit, to try to prevent deflation.

Slightly off-topic: the goal of the Federal Reserve -- the target of its policies -- is for the U.S. dollar to experience inflation of 2% per year. Not 4%, not 0%, but 2%. Can anyone explain why? I've always thought a target of 0% would make more sense. The 2% target means that sellers have to expend effort to reprice their goods and services more often -- for no other reason than the existence of that 2% target. And that's not a productive activity. (And then there's old-timers who kvetch about the dollar not buying as much as it used to, and see inflation as a symptom of decay. They would have less to complain about, and have improved confidence in the economy, and feel like they were passing a more stable world on to their grandkids, if the Fed had a 0% target.)

Re:Fixed supply of Bitcoins is not a big problem

[Copid]

Slightly off-topic: the goal of the Federal Reserve -- the target of its policies -- is for the U.S. dollar to experience inflation of 2% per year [wsj.com]. Not 4%, not 0%, but 2%. Can anyone explain why? I've always thought a target of 0% would make more sense.

Because for all of the costs attached to inflation, the costs attached to deflation are worse. The Fed can't guarantee that it will always hit its target, so it leaves some margin of error. There are other problems, but the most basic one is that some prices (wages, specifically) are "sticky" and don't revise downward easily. It's easier to work on the assumption that prices and wages will slowly rise than to try to sell people on a wage cut when prices drop.

If prices adjusted in either direction without friction and it was possible to keep inflation pegged at exactly some rate to avoid unexpected changes, it wouldn't really matter what the rate was or whether it was positive or negative. The known future inflation would just be built into all contracts and prices woud slew along as necessary. But long term contracts are negotiated with inflation expectations built in, and it's hard to get sellers to cut prices, so mild, gentle inflation is where we're at.

Broken window fallacy

[GPS Pilot]

Excellent post. The broken window fallacy is truly a fallacy.

In this case, $561,000 of electricity per day works out to a whopping $205 million per year!

Re:In other words, mining for bitcoin is not at al

[Anonymous Coward]

"Visa costs me nothing to use..."

If you actually believe that... Oh hell. Nevermind.

Re:In other words, mining for bitcoin is not at al

[Anonymous Coward]

People who see bitcoin purely as a means to profit are missing the point of a decentralized non-government-controlled pseudo-anonymous currency.

I was being polite with "little overexcited"...

[denzacar]

I mean... It's not mine to judge people slapping the elevator controls with their dick and then punching them.

Re:In other words, mining for bitcoin is not at al

[h4rr4r]

It is true. I get 1% back.

The merchant will not decrease the cost if I offer cash. I have often offered to do so. Cash and bitcoins have costs that VISA does not. Most of them do not impact you, but for a business paying VISA to handle that stuff has a value.