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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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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.
$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).
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
A "cosmonaut?"
Really?
If you disagree with me on social issues, then it's pretty clear that you are a narrow-minded bigot.
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.
Hence Peercoin.
Escher was the first MC and Giger invented the HR department.
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/
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
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.
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.
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 probably why he used the passive voice. He didn't want to focus on the authors, but the articles.
The point: the sentence I proposed wasn't passive, as you stated.
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.
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
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)
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...
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.
Sure there is: both sides arrange a meeting to do the exchange, and carry an armed handgrenade with them. If their grip slackens, for example because a sniper shot them, the grenade goes off, kills both parties and destroys the goods/money.
It's just too much trouble to bother for most transactions.
Forget magic. Any technology distinguishable from divine power is insufficiently advanced.