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How a Bitcoin Transaction Actually Works
An anonymous reader writes "Michael Nielsen has written a detailed article describing the nuts and bolts of a Bitcoin transaction. He builds the concepts from the ground up, starting with a basic, no-frills digital currency. He then examines it for flaws and tweaks the currency to patch up areas where we run into technical or security problems. Eventually, he ends up with Bitcoin, and explains how a transaction works. It's an interesting, technical read; much more in-depth than any explanation I've heard. Here's a brief snippet from a walkthrough of the transaction data: 'One thing to note about the input is that there's nothing explicitly specifying how many bitcoins from the previous transaction should be spent in this transaction. In fact, all the bitcoins from the n=0th output of the previous transaction are spent. So, for example, if the n=0th output of the earlier transaction was 2 bitcoins, then 2 bitcoins will be spent in this transaction. This seems like an inconvenient restriction – like trying to buy bread with a 20 dollar note, and not being able to break the note down. The solution, of course, is to have a mechanism for providing change. This can be done using transactions with multiple inputs and outputs...'"
Bitcoin is going through another period of heavy fluctuation: it fell from a high of around $1,200 per bitcoin to roughly half that, and as of this writing trades around $760 per bitcoin.
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He starts off with a middle-school grammar error: "Many thousands of articles have been written purporting to explain Bitcoin," Ugh. That's why writers need editors. If that's the best he can do, you know your brain will be leaking out your ears by the time you get even half-way through the article.
I own all bitcoins, because I own all numbers between 0 and 1.
UNITE with the Campaign for a Free Internet because today, our future begins with tomorrow!
I thought we were trying to be all green now, yet the very idea of bitcoin and the idea that we'll be running mining for the next 2 decades runs very counter to that idea.
Theo de Raadt thinks so, at least.
relax, this incarnation will likely mutate into the implantable mark of the beast technology, powered by the body. reject it btw.
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$20 to $1200 to $600 to $750, etc in a year? This is not a *currency* in any reasonable economic definition beyond "any medium used for exchange". It's much more like a *commodity* (and a crazy volatile one at that).
Yes, but I'm shocked at how no one is talking about the amount of electricity being wasted to generate digital coins.
Most bitcoins are mined where electricity is cheap, like Iceland and the US Pacific Northwest, that use hydropower. Water flowing through a turbine really isn't causing much environmental damage. Compared to the environmental damage of gold mining, this is much better.
> amount of electricity being wasted
That's why CONservatives love Bitcoins. They are terrible for the environment and thus morally wrong.
USPS state subsidized? USPS does not depend on any subsidy to survive. It generates its own revenues through sales of stamps and other products.
1. I can't wrap my head around it. At least with a fiat currency, I can hold a bill in my hand, walk into a store and change it into a tangible good. I can change numbers in my bank into currency at any time.
2. The financial institution where numerical representations of said currency will debit or credit those numbers accordingly and everyone recognizes it as a transaction.
3. And those numbers/money are guaranteed up to $250,000 by the FDIC or NCUSIF. I am not at the mercy of my hard drive and backups.
4. The financial institution goes under, I can still get my money up to the insured amounts - and there are ways around the limits.
5. Someone robs the bank, I'm not SOL.
6. The valuation of Bitcoins is not transparent enough.
Can any of the above apply to Bitcoin?
It doesn't look that way to me. Therefore, I will no be an early adopter.
Blah blah blah ponzi scheme
Wank wank not real money
*cough*cough*hyper-inflation
warghaghgahgahl... money laundering
Have I missed any?
"When life gives you lemons, don't make lemonade. Make life take the lemons back!" -- Cave Johnson
2 decades? Mining has to continue for bitcoin to be functional.
I looked into it, and it's not something that regular users can get into because of the specialized machines that are now needed. I have to giggle though, knowing there's a finite amount, and news articles reporting people throwing away hard drives holding their bitcoin wallets.
Yes, you missed your point ;D
Cost free eBook I read (by iBook/Kobo/Amazon/ObookO/Gutenberg etc.): "The Green Odyssey" by Philip Jose Farmer.
Who is Satoshi Nakamoto? I think that might be the big one. Remember he/they own almost 3/4's of all the bitcoins mined
This one individual or group has the power to crash the entire bitcoin economy if so desired.
Sorry, teleporters just kill you and then make a copy. A perfect, soul-less copy.
A "cosmonaut?"
Really?
If you disagree with me on social issues, then it's pretty clear that you are a narrow-minded bigot.
USPS state subsidized? USPS does not depend on any subsidy to survive. It generates its own revenues through sales of stamps and other products.
That statement is only true in theory. Reality is much different. Plenty more coverage here.
Get into mining? Nah. Accept bitcoins for, say, some server side coding or configuration management or game asset creation, etc. Yeah, why not. Oh crap, my friendly tip is now worth hundreds of dollars? Hmm. Well, now. That wasn't so hard. Crashes? Who cares, I'd have done the work for free anyway. Wise man say: The first step is the smallest, simplest, and hardest.
For a quick money transfer between two disparate real-world currencies it could be quite useful. As it becomes less volatile it'll be better to store goods in. The worth of a bitcoin IMO is in its distributed nature and ease of transfer between peers -- a intrinsic property of the currency itself. The speculative exchange rate of the bitcoins is irrelevant to me. It has value as a transfer medium at present. At least it's not owned and controlled by the World Bank.
An excellent weighing-in on the recent fluctuation. Bitcoins: The Second Biggest Ponzi Scheme in History
Bitcoin may or may not be a good investment, but it certainly is not a Ponzi Scheme.
The article lists the biggest Ponzi Scheme in history as Social Security. Social Security may or may not be good public policy, but it is not a Ponzi Scheme either.
Please don't feed the trolls. *grabs away the paper bag containing chocolate chip cookies*
While I can agree with a lot of stuff people say about bitcoin, the bitcoin isn't money argument is extremely stupid.
Claiming that something isn't money just because it fluctuates wildly in value is clearly wrong.
By that definition the currency in Zimbabwe wasn't money because of the rate its value was changing.
That said I think that bitcoin will stay some kind of oddity for speculators and people looking for drugs.
I believe that once all the coins are mined there will be a massive reduction in the amount of hardware mining.
I seriously doubt people will make enough from the mining transactions to justify the expense of constantly mining.
Right now the average transaction fee per day is 50 bitcoins which is significantly less than what can be currently made from mining.
Hence Peercoin.
Escher was the first MC and Giger invented the HR department.
Tulips! Tulips! My kingdom for tulips!
Nope, that's not quite right..
Tulip or not tulip? That is the question.
Escher was the first MC and Giger invented the HR department.
Have I missed any?
The ease of use for criminal activities.
That is only the case because congress has put ridiculously onerous pension funding requirements on the USPS. They have to fund pensions for people they haven't even hired yet. It is ridiculous how badly congress has fucked over the USPS - not only did they force them to prefund pensions, but then congress went and raided those pensions as if they were part of the US general fund. If congress had not done all that shit, the USPS would be deep in the black today.
http://postalemployeenetwork.com/news/2011/08/the-big-lie-about-postal-bankruptcy/
Why would I desire that? It's good to be rich.
Escher was the first MC and Giger invented the HR department.
I belive a truer statement would be (changes in bold)
If you think about how to distribute the initial bitcoins (somewhat) equitably, the only non-exploitable and automatic method you can realistically come up with - that involves no central authority - is approximately the one bitcoin uses: Hand out the bitcoins slowly over a period of time via an automatic lottery, and in proportion to computing power. (Anything else, such as: in proportion to the number of nodes, etc. gets easily exploited.)
Bitcoin was created by people who were extremely anti-inflation. Therefore the coin allocation was heavilly weighted towards the start.
note: i'm known as plugwash most places but i screwd up registering that here somehow in the past and now can't register
Yeah, you missed the part about all the articles being written by people who have a financial interest in bitcoin becoming popular. It's no less shilling than some of the other crappy articles we find about major companies.
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That is only the case because congress has put ridiculously onerous pension funding requirements on the USPS. They have to fund pensions for people they haven't even hired yet. It is ridiculous how badly congress has fucked over the USPS - not only did they force them to prefund pensions, but then congress went and raided those pensions as if they were part of the US general fund. If congress had not done all that shit, the USPS would be deep in the black today.
http://postalemployeenetwork.com/news/2011/08/the-big-lie-about-postal-bankruptcy/
If they would have left Lysander Spooner alone, this would not be an issue.
That is only the case because saying that the USPS pays its own way is an absolute and complete lie. FTFY
well social security gave immediate benefits to old people without them having to pay in when it was first adopted, and should it ever go away people who paid into it all their lives are the last ones out who get screwed. So by definition it kind of is a ponzi scheme... but yes, it's not the real definition of a ponzi scheme.
2 decades? Mining has to continue for bitcoin to be functional.
It can't and you would know, if you knew anything about bitcoins:
On average a block should be mined every 10 minutes, so every time 2016 blocks have been mined, the bitcoin protocol adjusts the difficulty. If the last 2016 blocks were mined in less than 2 week (2 weeks * 7 days/week * 24 hours/day * 60 minutes/hour * 1 block/10 minutes) , the difficulty is increased to make it take longer for the next 2016 to be mined. Vice versa, if it took longer than 2 weeks to mine the last 2016 blocks.
At the beginning the bounty for mining a block was 50 bitcoins. After every 210,000 blocks the bounty is halved and the bounty is currently 25 bitcoins per block.
Since there's a fixed maximum number of bitcoins (21 million), it's easy to calculate when mining will stop (give or take 2 weeks).
You forgot ant-semitic!
China has banned Banks from being involved with Bitcoin, however this could have Medieval implications? A perverse sort of anti-usury law this time around to prevent Jews from developing Bitcoin services, all of which stems from an obvious conflict of interest.
The Christian ban on usury was only lifted with the hastily forged sets of chronology leading to the Gregorian calendar. However flawed it was to setup invented lineages, only a common calendar allowed for the acceptable use of compound interest. China's strategy is to absorb Judaic Capitalism into Bitcoin without permission. They did this to comply with my conflict of interest clause in the Ingridx Free Public License, which further permits only non supporters of The Jew to develop the Ingrid AI over Bitcoin, As you can see below China needs Ingrid to develop Bitcoin.
As far as I know, I am the only one predicting we'll reach peak Bitcoin around mid January, 2014 (www.mcoscillator.com). In the meantime, my Ingrid system is set to announce its active-5 point embalming solution, to pin on the world rump of Capitalism. Ingrid can show meaningful planetary scale encryption for all its AI Insulated Bitcoin transactions, say those over $10,000 for starters.
"A Single-Payer Bitcoin Insulation with meaningful intrinsic value", is what I can stand up and explain in a television interview. Notwithstanding Greenspan saying there is no certainty of "where the money comes from", there will be enough certainty as to why a single payer assurance needs to be made or withheld. This will satisfy the People’s Bank of China, by showing how they make it a currency with “real meaning”. Furthermore, with them as single payer, tapping certain transactions will create the required legal status.
What about considering the whole total of the human economy as a Ponzi scheme?
With such a high fraction of the total owned, it is not possible to convert it to material goods without massively devaluing the "currency" in the process.
I know a lot about Bitcoin. "Mining" and "Verifying transactions" are the same thing.
We need the latter even when there will be "no" new coins minted (tiny block reward). The miners (= the ones who verify the transactions) will still get the transaction fees.
it's in my head
Blah blah blah ponzi scheme
Wank wank not real money
*cough*cough*hyper-inflation
warghaghgahgahl... money laundering
Have I missed any?
Gah! Gah! Child Pornography!
Whoa, Whoa... terrorism!
Huh? Huh? Who is Satoshi Nakamoto?
Look! Look! Just like tulips!
Nope, Nope - can't pay taxes!
Where did you get that information from? I haven't seen an estimate like that anywhere else, and that would be all over the place if it were true, even if just by speculators trying to short the market.
that kept approximately 3/4's of all bitcoins to his/themselves
Simple. Your claim isn't true. (Easily verifyable)
(So why did you post it in the first place?)
Who is Satoshi Nakamoto? I think that might be the big one. Remember he/they own almost 3/4's of all the bitcoins mined
There are over 12 million Bitcoins in circulation. The estimates I have found for Nakamoto indicate about 1 million Bitcoins., though others have come up with as much as 1.5 million. Either way, that's obviously far from three quarters.
As for your first question, an interesting recent theory is Nick Szabo.
Yes. Listing a concern doesn't count as addressing it.
You missed unstable price fluctuations, no roadmap for ubiquitous deployment, and shady exchanges. I'm sure that there are more.
Sig: I stole this sig.
Bitcoin is a protocol and a new one perfected by China will withstand all the criticisms of the Randian, Gary North.
well social security gave immediate benefits to old people without them having to pay in when it was first adopted
No it didn't. If you didn't pay in, you didn't benefit. Anyone already retired with SS was adopted didn't get squat.
So Slashdotters are quoting Gary North, king of the Y2K hype? Yeah, he's real insightful.
No Inflation Taxation without Representation
...and the whole of human civilization?
"Have I missed any?"
Yeah.
Teh terrorz, and teh kidz.
Mining you say? Like actual mining which brings minerals out of the ground and thus gives a currency an economic anchor in value? I think you'll find it's more environmentally friendly to mine bitcoins.
The whole concept of mining helps enforce the scarcity of the currency. The fact electricity costs real money is one of the economic underpinnings of the currency.
if the banks do a boom and bust, its with the tacit approval of the higher up political figures that
the banks have bought. there are limits to what one can accomplish when one is actively avoiding
being labled a criminal... and must take steps to appear reasonable and to cover federal requirements
to the minimum standard.... just water those standards down? your doing business....
bitcoin is out of the control of the politicians, mostly. they cant be rewarded for turning the other way....
they can't fund their campaign's with donations that were required to allow for the watered down
standards.... when they are beyond regulation.
I know slashdot is simplistic and not particularly aware of reality... but cant you guys just clue into this?
bitcoin is entirely vulnerable to the whims of the dominant currency holders without any intervention
whatsoever by meddling politicians looking fro bribe money... because they are not required.
the establishment leeds us regularly, systematically, and in a controlled manner. Like the vampires in
the "blade" movie series, they need us... they have to make compromises in their hunger for survival.
bitcoin? no requirement for any compromise. completely and entirely at the mercy of an open international
market which does not even identify itself and its holdings. The alpha dog's rule unchallenged by anything
other than their own limited creativity.
boom and bust.... its all fake.
you buy bitcoin as an investment? you'll get whats coming to you. what you deserve.
the banks had to work their evil little asses off to get into the subprime morgage game....
bitcoin is completely without any interference. no hoops to jump through... no rules to bend,
no piper to pay. no witnesses.
you are all so utterly simple.
>he fact electricity costs *real money* is one of the economic underpinnings of the *currency*.
First call out: yes. Bit coins cost real money to make
Second call out: BTC isn't a currency. It's a tradable security. Just try to buy your groceries with it.
Dumbass
Given that such hardware would essential void all the encryption on the internet (including the one between your computer and the bank when doing online banking, and I'd not be surprised if the same encryption is also used for the communication between ATMs and the bank, and for the communication between banks), there's a big incentive to build such hardware anyway. That it apparently hasn't been done yet is a good hint that the codes are as secure as the cryptographers assure us.
The Tao of math: The numbers you can count are not the real numbers.
Maybe you can't buy groceries everywhere with it, but you can buy a meal at Subway with it.
Deflationary currency. The fact that no one will mine once the coins've all been collected because the transaction fees ain't worth shit compared to mining. Getting your BTC cashed out to real money. Civil forfeiture laws in the US (and other places) coupled with the fact that every coin can be 100% traced leading to a majority of coins that will someday be linked to a drug crime and thus their owners may be compelled to forfeit them. Supporting criminals (botnets mining, silk road, child pron, etc, etc). Wasting electricity. Uselessness as a currency due to time needed to confirm a transaction (no one wants to hang out at the store for 15 minutes). Unregulated = exchanges/wallet sites close and abscond with the coins. Scalability issues due to size of blockchain. The fact no one can use it as a currency beyond niche and criminal markets/can't buy food, pay rent, or pay taxes with it.
There are probably a LOT more.
true but you paid a little and got a lot.
Ida May Fuller worked for three years under the Social Security program. The accumulated taxes on her salary during those three years was a total of $24.75. Her initial monthly check was $22.54. During her lifetime she collected a total of $22,888.92 in Social Security benefits.
You forgot digital thefty/buggery.
It only takes an hour if you elect to pay zero fee.. If you pay a higher fee (like 5 cents worth), your transaction will be processed near instantly. Then, it will be verified usually around 10 minutes to an hour later.
Also, the ledger is only gigs in size after years of Bitcoin use.. When it gets more popular, the ledger will increase faster. But, the size of hard drives is increasing - and you don't even need to have the whole ledger in order to participate. Lightweight clients, such as Multibit, allow you to only obtain enough of the ledger to be certain of the transactions. In the end, it might just be large institutions and hobbyists that all hold the Blockchain (ledger)..
As far as hacking, Bitcoin will get hacked the moment everything else is already hacked.
--- We need more Ron Paul!
that's not true. first, this is a public key signature. the message is known, you are validating the identity. second, all cryptography is brute force attackable if given sufficient time. For certificates, they always expire so that they become invalid by the time someone figures out the private key. To my knowledge, the private key associated with a wallet will never change. It is plausible that someone with sufficient resources could thus with enough time steal your wallet's public key. This is why they tell you to split your bitcoins up into many wallets so that you don't become a target.
Yes, but I'm shocked at how no one is talking about the amount of "first post" trolls wasted with an actual insightful first post.
My ism, it's full of beliefs.
Why should it pay its own way? It provides a public good. Government should fund it with bonds that can be bought by the Fed, which is required to return the interest to the Treasury; so the borrowing has zero cost. Then govt keeps the loans rolling over forever, much like a bank.
The point is, regardless of USPS's current fiscal state, that if it were allowed to operate as a real business and set its own prices, there is no way it would have any kind of deficit. Sure, I understand that they have to carry mail to remote locations, and they have a bloated staff, but all of that would be irrelevant if they could just raise the price of a stamp by a few cents without waiting for Congress to approve/fuck them over first.
Gary North... Gary North...That name sounds familiar. But Why?
Ah. Found it.
"So let us be blunt about it," says Gary North. "We must use the doctrine of religious liberty to gain independence for Christian schools until we train up a generation of people who know that there is no religious neutrality, no neutral law, no neutral education, and no neutral civil government. Then they will get busy in constructing a Bible-based social, political and religious order which finally denies the religious liberty of the enemies of God."
Invitation to a Stoning
Just try to buy your groceries with it.
If you live in a city like San Francisco it's at the point where you can almost live off BitCoin if you are determined to, including groceries. It's far from easy, but it's coming slowly.
I thought we were trying to be all green now
I'm not.
Tulips. You forgot the tulips.
Red to red, black to black. Switch it on, but stand well back.
Please let me be responding to a troll.
Anywho. The purpose of mining is not to gerate bitcoins, it's to verify transactions for the network. Rewarding miners for finding blocks is the incentive for people to spend money on hardware and electricity which in turn secures the network. After all the coins have been generated in 12 decades (2140) transactions will still need to be verified. The incentive at this point will be the transaction fees that are also given to the miner finding the block in which the transaction is included. Next time, try without the condescending attitude. It makes you look like less of an asshole when you're wrong.
thanks for posting the link. Wish it had a few more graphics and diagrams though. Maybe I'm more of a visual person.
An excellent weighing-in on the recent fluctuation. Bitcoins: The Second Biggest Ponzi Scheme in History
Bitcoin may or may not be a good investment, but it certainly is not a Ponzi Scheme.
The article lists the biggest Ponzi Scheme in history as Social Security. Social Security may or may not be good public policy, but it is not a Ponzi Scheme either.
If most people come to the conclusion that Bitcoin is too volatile for them to complete monetary transactions with, they effectively become beanie babies. The value becomes zilch and everyone who holds Bitcoin when that happens walks away with nothing. Sounds an awful lot like a Ponzi scheme to me.
People have argued that when Bitcoin has more volume, the volatility will decrease. There is not a shred of evidence to support that. Bitcoin has been gaining volume for the last couple of years, and if anything, it is more volatile than ever.
Even those who arrange and design shrubberies are under considerable economic stress at this period in history.
Bitcoin may or may not be a good investment, but it certainly is not a Ponzi Scheme
Suggest an addendum to Godwin's law.
If a discussion continues long enough of any new kind of intangible asset that appears to bring in speculators and exhibits S-curve like growth, there will eventually be mention of Ponzi Schemes.
Of course a key difference with a Ponzi Scheme; is that, in a Ponzi Scheme, the person running the scheme gets paid immediately, after soliciting investors, AND there is a formal promise of an outrageously good return on the original investment, used to promote/solicit investors, There is often deception in the form of statements with false returns, and existing capital, or funds provided by soliciting more investors are used to meet the payouts of return to earlier investors..
Since Bitcoin doesn't work like that... BTC itself is not a Ponzi scheme.
Of course.... you might claim one or more of the BTC exchanges are "Ponzi schemes"; if they are promoting Bitcoin, and suggesting that people "convert their dollars to Bitcoin" at a certain rate, with a promise of a return ---- then the people who convert Bitcoins back to dollars are paid, using the funds provided from earlier investors, while the exchange takes out a fee in dollars and a fee in Bitcoins every time an exchange happens.
However, in this respect..... all FOREX brokers could be thought of as Ponzi schemes, if they promote any currency, to inhabitants of a country that use a different currency.
>Once you have this awesome protocol for money transmission, the next question is: how to get bitcoins in wide and equitable circulation in the first place?
Why does it have to be a new currency? Why can't we have digital USD that can be transmitted this easily without the use of credit cards?
The government is in charge of printing money, why isn't it in charge of creating/handling digital currency?
MABASPLOOM!
Say you are to compare bitcoin to gold. (and i am not saying that bitcoin is gold 2.0... but for the sake of argument). Is it not expected that you will need to expend huge amounts of resources to mine gold? Does that discourage physical miners from expending huge amounts of resources, quite possibly to the detriment of the planet? No, they do this because it is profitable to do so, despite objections from environmentalists. Why should we abondon bitcoin because it consumes electricity? Also, what is the amount of energy needed to maintain the current system of government controlled currencies? In the end there is no free lunch. Validating transactions takes energy, the generation of the coins is the reward for doing so.
Why can't we have digital USD that can be transmitted this easily without the use of credit cards?
We can. It's called Dwolla. And at the current exchange rate, its 0.25 USD transaction fee isn't that much higher than the 0.0001 BTC transaction fee of Bitcoin.
Theoretically you could start mining with your laptop and despite the infinitesimal odds of solving a puzzle, actually be successful and get a 25BTC reward. That would involve incredible luck. Actually the chance is so small as to be practically impossible. In the long run you will mine in proportion to the computing power you bring to the network. It's why pretty much everyone mines from a pool today. You will just be throwing money out the window going it alone. So I would say its not luck at all. Considering the amount of money you need to invest to get a suitable mining rig and the ever increasing difficulty, you would most definitely come out ahead simply buying the coins directly.
it is not possible to convert it to material goods without massively devaluing the "currency" in the process.
Not all the devaluation need happen at once because not all the conversion need happen at once. Mr. Nakamoto could just go on a BTC-to-fiat exchange once a month and withdraw enough to live on for a month. Few people would care.
Altcoins like Gridcoin seek to put that wasted electricity to use, doing BOINC work and earning coin credits for it.
Seems like a great plan, doing more than just signing transactions with busy work.
I know you meant private key and not public. Anyway, I suppose if I were to create a unique grain of sand and hide it in one of the world's deserts or beaches that you could eventually find it. You are going to need something a whole lot better then a shovel and magnifying glass, which is all you have right now with todays computing power.
I see bandwidth as the limiting factor and not hard drive space. It will be interesting to see how the community addresses the increased blockchain size in the future. I would imagine that some pretty smart people are thinking about this. I don't see too many people being a full node on the network from their DSL and Cable connections at some point.
The cited article is interesting, but he never gets into Bitcoin's "contract" capabiilty. There have been proposals to add mechanisms to Bitcoin so that you could send Bitcoins to someone, but they couldn't spend them until the sender committed the transaction. This provides a way to insure you get the goods when you order something.
So far, that's a future feature, not a usable one. This is why Bitcoin remains the scammer's paradise - anonymous, irrevocable remote money transfer. There's little risk of annoying lawsuits, cops, or armies of angry customers with pitchforks coming after you.
As a result, more than half of Bitcoin "exchanges" have gone under, usually taking customer funds with them.
Bitcoins are not rare, they are 1s and 0s in a computer, it is artificial scarcity, nothing more.
Oh, people /have/ talked about that since day one, and this objection has been pretty thoroughly debunked...
Eh? How so? None of the examples you provided have debunked it...
If Bitcoin were to take over for the US dollar, all your examples would become true about it.
The only difference? A huge amount of power would be consumed to verify bitcoin transfers and the chain would become very long indeed.
There is nothing special about 1s and 0s in a computer, Bitcoin's entire design is about how we can consume as many resources as possible to create them, when in truth they could be created out of thin air. (just like US Dollars are)
The fact electricity costs real money is one of the economic underpinnings of the currency.
It is irony that you use the term "real money" when talking about paying for electricity to create bitcoins.
What happens when the power company will accept payment in bitcoin? It becomes a circle jerk, you use the power from the electric company to produce more bitcoins than it costs.
Except, that is like saying you have to only pay $500 to buy a tree that grows $1,000. If everyone can do it, then money becomes worthless.
If everyone can't do it, then you have a lot of trees being grown just to produce money.
Dead wrong. No one has anywhere near that number of bitcoins. And no one for sure knows for sure if Satoshi has a single....well....Satoshi. And thanks to bitcoin being a public ledger thats provable. So i guess the new saying would be "Wallet Address's or it did'nt happen"
It's not worth it to me since it gets too hot during the heat waves (up to 90F degrees in my upstair tiny room).
Ant(Dude) @ Quality Foraged Links (AQFL.net) & The Ant Farm (antfarm.ma.cx / antfarm.home.dhs.org).
Wasted. Hah! You mean like money wasted to mine diamonds, gold, silver, and everything else on this planet that you place a dollar amount on? Bitcoins are the cheapest thing to mine for their value vs say gold. How much earth do you have to churn up to get an ounce of the pretty?
Ahhh both worth is not a fixed term.
You can compare that to real money as well. It costs more to create a nickel then what it's worth. The problem is that the nickel is unique in a group of denominations made of other materials with different value so it hasn't affected the currency.
What a more practical example? Let's mine gold.
It costs money and energy to get the gold out of the ground. The end result is that the price of gold will trend in the long run at a value higher than the cost of digging it out of the ground. The same applies to bitcoin. The cost of electricity will anchor the value to ensure mining remains viable in the longrun due to the economic inputs into the system. If electricity goes up, the cost of mining goes up, then either the value of bitcoin goes up or it collapses as a usable currency. I don't see the problem with paying the electricity company in bitcoins. Just like a gold miner gets up in the morning and gets some bread to get a feed. Without the bread he couldn't mine gold, yet with the gold he can pay for the bread. What is the problem?
The problem with your tree analogy is that you forget the other inputs into the system. In one case you're right but just like any project including growing a tree there's a payback period. Sure you'd buy a $500 tree now if you'd instantly get $1000 of value out of it, but what happens if you need to grow that tree, or if the value trickles out slowly? Know why I don't mine bitcoins? Because to break even on my electricity bill I'd need to do ASIC mining and I don't want to spend the money to buy a dedicated miner if by the time I pay it off (2 years or so by last count) the currency may in the meantime collapse. This is also the reason I don't mine gold, I can't afford a decent dragline.
Europe or the Ivory Coast
This is a great article. It combines about 30 pages of info that I had to scan to learn it down to one.
It also explains how to manipulate Bitcoin mining to guarantee you mine the next block. It's in the section on what happens when two miners have the next block in the blockchain ready at the same time:
Occasionally, a fork will appear in the block chain. This can happen, for instance, if by chance two miners happen to validate a block of transactions near-simultaneously – both broadcast their newly-validated block out to the network, and some people update their block chain one way, and others update their block chain the other way:
This causes exactly the problem we’re trying to avoid – **it’s no longer clear in what order transactions have occurred, and it may not be clear who owns which infocoins.** Fortunately, there’s a simple idea that can be used to remove any forks. The rule is this: if a fork occurs, people on the network keep track of both forks. But at any given time, miners only work to extend whichever fork is longest in their copy of the block chain.
Suppose, for example, that we have a fork in which some miners receive block A first, and some miners receive block B first. Those miners who receive block A first will continue mining along that fork, while the others will mine along fork B. Let’s suppose that the miners working on fork B are the next to successfully mine a block:
**After they receive news that this has happened, the miners working on fork A will notice that fork B is now longer, and will switch to working on that fork.**
And the miners on fork B get paid their 20 BTC for mining the next block!
Presto, in short order work on fork A will cease, and everyone will be working on the same linear chain, and block A can be ignored. Of course, any still-pending transactions in A will still be pending in the queues of the miners working on fork B, and so all transactions will eventually be validated.
Presto indeed!
If you set up inside a city fiber ring and made BTC exchanges and *also* mined BTC blockschain solutions you could game out the transactions and network traffic so that **your BTC** solution was always the first available to the network because it is the closest geographically and by network topology!
If there's a tie, you have the next solution ready to break the tie and get the BTC reward!!!!
There you have it...it's a money machine...well a BTC machine ;)
Thank you Dave Raggett
"Value dropping from severely overhyped to fair levels, leaving Bitcoin still usable as currency as it was intended" sounds an awful lot like "Founder grabbing all the cash and flying away by the night, leaving nothing at all for clueless marks" to you?
Almost every interest oriented business model is a ponzi scheme except when you can print money. The big thing about illegal ponzi schemes is the promise the organizer makes about the value growth and down play of potential risk. You should only buy bitcoins at a price you think they are worth.
Tim Landers finds bitcoins very useful. He uses them to pay for sex with underage Filipino boys.
Even if a nickle costs 6 cents to make, it gets used over and over again without incurring any further costs. There is a cost in compute power every time a bitcoin changes hands. Pollution created by mining gold doesn't have to be repeated over and over either, and there are practical useful applications for gold, between jewelry and electronic manufacturing.
Bitcoin has no actual practical utility. It is just an expensive, polluting way to come up with another pattern of 1s and 0s. The whole thing is, frankly, stupid. The idea of another currency is not, but the idea that the currency depends on massive amounts of compute power is stupid.
Besides, most money doesn't move via a physical nickle, it moves in 1s and 0s in computers. The cost to do that is almost zero in terms of power (and far less than to move bitcoin around).
Let me try another approach. If you use power to produce bitcoin, then you're adding to the CO2 in the atmosphere, all to create fancy 1s and 0s. Even if your power comes from wind or hydro, that power could have instead been used to offset coal, so ultimately since we have a fixed amount of clean power, you're polluting by mining bitcoin.
Bitcoin, the ultimate dirty, unclean, polluting, currency...
peercoin.net
The author of TFA claims that there is little to no no anonymity to be afforded by the Bitcoin network as all transactions are recorded in in the blockchain while completely ignoring the extremely low cost of creating a Bitcoin wallet and the arbitrary number of receiving addresses associated with any given wallet. Without the boogeyman abilities afforded to spook organizations such as the NSA to tie Bitcoin addresses to specific IP addresses by strong-arming ISPs Bitcoin could be used anonymously by those who choose to do. Isn't it time to turn on the lights and expose the boogeymen for the paranoid shiatbags they really are?
Just my two Satoshi's worth...
There is nothing special about 1s and 0s in a computer, Bitcoin's entire design is about how we can consume as many resources as possible to create them, when in truth they could be created out of thin air. (just like US Dollars are)
First of all, the resources are not used to create the coins, they are used to support the distributed notarization system. Even if no coins were being issued, you would need the same process, and indeed it is slowly becoming the case as the block reward drops. So the "created out of thin air" bit doesn't have any relevance to the proof of work requirement. That's a common misconception that even Paul Krugman got wrong.
At this point, we (as humanity) don't know a better way to create a decentralized notarization system, but there are some candidates. After any of these are proven to be secure enough, Bitcoin can make the let go of the proof of work scheme. Until then, it's not fair to say that Bitcoin consumes as many resources as possible, even though within the system that might be true.
this objection has been pretty thoroughly debunked...
Debunked in the traditional bitcoiner way, yes: Handwaved away, ignored, and claimed to be debunked.
It is probably still far cheaper than the old-fashioned way of doing things
As we see here. Claim it is "far cheaper than the old-fashioned way", ignore that the old-fashioned way is handling many orders of magnitude more transactions, and pretend bitcoin wouldn't need to scale up dramatically to handle the same.
Electricity being wasted ?
I suggest mining bitcoins in winter only.
The Joule effect will convert all the "wasted" electricity into heat which you need anyway.
Except that the hydropower that is used this way cannot be transported to other regions and displace coal power. Now for an isolated island like Iceland, transporting is not an option, but I guess for the US Pacific Northwest it may be.
Avantslash: low-bandwidth mobile slashdot.
So anything that involves risk is a Ponzi scheme now?
Forget magic. Any technology distinguishable from divine power is insufficiently advanced.
A Ponzi scheme is a fraudulent investment operation that pays returns to its investors from existing capital or new capital paid by new investors, rather than from profit earned by the individual or organization running the operation.
Do you not know how Social Security works? Social Security pays benefits from current social security taxes. Those benefits are the "returns." Yes, many people get out more than they paid in, so there are returns. And there is no profit in social security. Anything not needed to pay benefits this year (which these days is either nothing, or very little) is "invested" in US Treasury Bonds. When Social Security redeems those bonds, they will have to be either refinanced on the public market, or paid back by future taxpayers. As we further delay Social Security reform, the odds of avoiding huge benefit cuts and huge tax increases goes down. Most likely, there will be both.
Historically, Social Security has been saved by removing exempt income, thus bringing in new social security tax income. In the private sector, that would be called "finding new investors." There's lot of talk right now about raising the income cap for Social Security taxes. That money will not be invested for profit. It will be used to pay off current investors because Social Security IS A PONZI SCHEME!!!!!
Far too many people point to the rapid rise in value of BitCoins as a feature, not a bug. They are confusing investment returns with usefulness as a medium of exchange.
Any actual currency that unpredictably changed in value in relation to something you'd actually want to buy (like USD/EUR/etc.) by several % a day All. The. Time. would be considered an economic catastrophe for any economy that relied on said currency. For starters it makes a functioning credit market 100% impossible. You'd have to be out of your mind to borrow or lend money in the things... A lender could end up holding a worthless note, and a borrower could end up with a situation that would make a loan shark look practically free.
An excellent weighing-in on the recent fluctuation. Bitcoins: The Second Biggest Ponzi Scheme in History
Bitcoin may or may not be a good investment, but it certainly is not a Ponzi Scheme.
The article lists the biggest Ponzi Scheme in history as Social Security. Social Security may or may not be good public policy, but it is not a Ponzi Scheme either.
If most people come to the conclusion that Bitcoin is too volatile for them to complete monetary transactions with, they effectively become beanie babies. The value becomes zilch and everyone who holds Bitcoin when that happens walks away with nothing. Sounds an awful lot like a Ponzi scheme to me.
People have argued that when Bitcoin has more volume, the volatility will decrease. There is not a shred of evidence to support that. Bitcoin has been gaining volume for the last couple of years, and if anything, it is more volatile than ever.
There is no returns with bitcoin... don't ponzi schemes have someone promising a return?
Mine litecoins, instead... All you need is a spare GPU and you're golden. There are markets out there where people will trade BTC for LTC, readily.
The first post messages are unsiged posts using recycled electrons.
Bitcoin uses electronic signatures to tie up the electrons and is thus wastful to the environment. Except if you use the residual heat from the miner asics to heat your house. ;)
They have value because people assign value to it, just like gold. The usefulness of gold is way overrated. There are tonnes and tonnes of it sitting there doing nothing except acting as a store of value. The scarcity of gold is only caused by people hording it, it has relatively little use otherwise. I would say there is artificial scarcity to gold as well.
check out:
http://mining.thegenesisblock.com/a/b58934cea0
I was curious how much 1000 Ghash/sec would cost, and pay out. A $3600 ASIC miner will pay for itself in under 5 days, and the estimated ROI after 1 year is about $40,000 (it actually starts losing $10 - $20 a month the last few months based on current rates) and then you could just buy the next one and keep making $
I was surprised!
Cheers
Nope, nope. you're talking about regular government sponsored monies. This is about bitcoin.
Paying taxes to buy civilization is like paying a hooker to buy love.
Yes, you have missed the point that with the possible exception of money-laundering all of those are in fact valid points that have yet to been answered by the pro-bitcoin people. You also confused inflation with deflation.
Bitcoin is most certainly not a real currency at this point. It's a commodity that a very limited set of mostly online services accept as a form of payment. And it is by design such that it tends to to increase in value over time, which means hyper-deflation not hyper-inflation as you claimed. This makes it almost useless as a currency (hyper-deflation is even worse for a currency than hyper inflation) but at the same time, very lucrative as an investment, especially for those who got onboard while it was possible to mine millions with regular desktop CPUs/GPUs. The early adopters are certainly at a very distinctive advantage. While this does not directly mean that BC is intended to be a malicious Ponzi scheme, it does share quite a lot of features with those schemes.
As for money laundering, that's something that I don't see as such a large issue, as BC is not really anonymous. That is, the exchanges of cash into BC and vice versa are traceable, so any large scale money laundering can be spotted.
As for everything else, to this day I still haven't heard a good reason to use BC as anything else than a speculative investment target. I see zero benefits in using it for purchases. If I want anonymity, I'll be better off sticking with cash. At least with that, in addition to being truly anonymous compared to the pseudo-anonymity of BC wherein anybody can see who paid what to whom (a feature, not a bug), I also know that the money I give to my friend will be valued roughly the same (or a tad less) in a few months time and that my currency is secured even if my bank goes down - 2 features I see as essential for any real currency, and 2 features sorely missing from Bitcoin in its current state.
"It is the business of the future to be dangerous" -Alfred North Whitehead
What's the incentive for the company to sell their ASIC miner, given those numbers? They would make more money just by plugging it in, wouldn't they?
Subject says it all...
(Shrug) So what else is new? Bill Gates has the same problem.
To the extent BTC can be compared to gold, then perhaps it is best not considered a currency at all, deflationary or otherwise, but rather a basis for other currencies. That suggests that new currencies will emerge that are pegged to BTC, just as the US dollar was formerly based on gold.
All of your objections are valid, but they also apply to gold. Gold mining is mostly an occupation for large organizations with access to large amounts of machinery and energy. It is hard to cash out without taking a financial beating from back-alley dealers with "I Buy Gold!" signs. It can be forfeited to the government, and in fact has been declared illegal for individuals to own in the past. The origins and history of a given sample are traceable to some extent through modern spectroscopy and radiometric techniques. Gold, too, lends itself to criminal activity in many respects. It would be time-consuming for individual merchants to confirm transactions in gold, given thousands of years' worth of counterfeiting tricks. And it has massive scalability problems due to, well, its mass.
Yet few people deny that gold has value as either a basis for a given currency or as a hedge against one.
Follow the money. Who voted for what, and who is pulling their strings ?
Congress is a bipartisan mess of corporate assholery.
Why should the USPS be funded that way, and not the entire budget?
Finally! A year of moderation! Ready for 2019?
Thanks for pointing out the 'groceries argument' ... IMO not a large majority expects BTC to be used to do 'quick micro-transcations' like groceries as it takes time to confirm a transaction, however, BTC is still quite viable so long as its tradable freely with dollars. for instance, gyft just launched bitpay support on their gift cards sale (to bitcoin ) storefront. Now you can actually by an amazon or target etc giftcard with BTC in minutes and have you groceries purchased at amazon.
secondly, yes it takes electricity to mine BTC but if you compare dollar cost of energy & the dollar value of BTC mined (especially with the asic & fpga miners) you'll see its still quite profitable. also that profit margin allows asic manufactureres to goto the next process node (like KnC just went 20nm) thereby keep increasing the efficiency & total compute HP.
Who's "we"? The people mining are paying for their power bill, you're no the one to decide whether it is "wasting".
This is weasel words if you're a systems thinker.
If two systems produce the same or similar outcome, they may be compared and - for some modelling purposes - equated.
Saying Bitcoin is "not a Ponzi Scheme" is deliberately ignoring the obvious and large similarities between Bitcoin and Ponzi Schemes, while overplaying spurious definitional technicalities like your "formal promise" example. And these technicalities aren't even real because there is no SI definition of Ponzi Scheme and different authors apply different criteria anyway. The phrase "formal promise" is not found on WIkipedia's page "Ponzi Scheme", for instance.
It only takes an hour if you elect to pay zero fee.. If you pay a higher fee (like 5 cents worth), your transaction will be processed near instantly. Then, it will be verified usually around 10 minutes to an hour later.
Yes, that "an hour later" part is what OP was talking about.
I'll repeat: No currency that routinely fluctuates by several % a day (and occasionally by over 10%) with a 50-basis-point bid-ask spread, is a serious currency. (Not even the stupidest retail currency investor would accept a 0.5% bid-ask spread when trading currency. It's only cheap when you compare it to the currency booth at the airport.)
Yes, relative to other national currencies, the JPY is volatile. Relative to BtCs? The JPY is solid as the proverbial rock.
The costs to hedge BtC exchange rates would be so high (is such a product even available?) that no sane business would ever attempt it. Yes, I supposed you could integrate a real-time feed into the current BtC rate into your pricing engine, add a few %, and let the consumer deal with it, but why bother?
BtC's currently fluctuate like commodities, not currencies.
No I'm arguing to correct your miss-conception that somehow dollars a magically green while bitcoin is the source of all pollution.
The reality is that a modern economy is underpinned by a stupid amount of computing infrastructure. All the bitcoin mining going on in the world and happily keeping the currency running is a small pittance compared to the computing power required to keep the banks operating. Or do you think you can compare giving someone cold hard cash to whisking a bitcoin all the way around the world?
I think you're polluting just as much if not more by supporting the banking infrastructure.
But hey if the green credentials of bitcoin is the only remaining hurdle to convince people of I guess we finally have a mature cryptocurrency then.
I think you're polluting just as much if not more by supporting the banking infrastructure.
But that is the point you're missing... the banking infrastructure won't go away, even if bitcoin completely replaces the USD.
This is not some fantasy world where bitcoin is going to replace the banks and wall street. It is just another tool, not a new system.
So bitcoin will just add to the existing system, not replace it.
It may not completely but it may go away enough to offset it. Not right now, but maybe in 20 years. Hell look at the movement away from cash in some countries. You know how much money I keep in my wallet? None. I can tap my bank card on the side of vending machines now to get my coke. None the less the debate we're having right now was identical to the one from back 30 years ago how the credit card would never displace cash, and if they cared about it back then someone would have complained about the carbon footprint too.
I'm not exactly comparing JPY to BTC; I've mentioned many examples that a currency can be seen as such other than being non-volatile, and JPY is one. And also to refute your simplistic statement that instability is a cause to economic failure.
The thing is, in a way, you're basically saying BTC will fail because it's too small. Real world currency spreads are small because there's both large trading volumes and arbitrage is often easily exploited. It may or may not go away when it becomes larger.
It's not bad to compare BTC fluctuations to spreads at currency trading kiosks. After all, these kiosks survive, and I'd bet real money (not Bitcoins) that their total worldwide trading volume is more that that of Bitcoin. One of my key points was that BTC does not have to support a full-blown nation's economy to be seen as a viable currency. It only has to be usable in markets of enough variety and size.