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A Rebuttal To Charles Stross About Bitcoin
New submitter buddha379 writes "Over the holidays we discussed a story from SF author Charles Stross called 'Why I Want Bitcoin to Die in a Fire,' just as Bitcoin's price collapsed on news of the Chinese government's cautious approach to the fledgling internet currency. Well known economist Paul Krugman quoted the piece in a NY Times blog post called 'Bitcoin is Evil'. Now, with U.S. regulators reaffirming their hands off approach, U.S. companies embracing it and prices surging again, Bitcoin Magazine returns with a rebuttal called 'Why Charles Stross Doesn't Know a Thing about Bitcoin.' The article notes that like many other popular pieces, Stross' story seems to 'completely miss the point on why Bitcoin is a revolutionary concept.'"
> Once the last coins are mined, what happens?
Miners also get transaction fees included in the block, so they still have incentive to search for block hashes.
> how do you set fee levels such that people will validate little transactions as well as big ones?
Fees are *user defined*. If you are in a hurry, slap a big fee on it. If you can wait, put a small fee on it. The bitcoin software allows zero-fee transactions if you meet some conditions, and some miners will include zero fee transactions in a block if there is room. In the long run, many small transactions will move "off chain". For example, Coinbase processes bitcoin transactions for merchants, accepting BTC payments on their behalf and depositing local currency to their bank account. Conversely they sell BTC to individuals and pull money from bank accounts to pay for it. When a Coinbase user uses their online wallet to pay a Coinbase merchant, that can be all internal to Coinbase, and never reach the Block Chain. Eventually such processors will arrange to settle with each other in bulk transactions, gathering up many little ones and posting it as one big transaction on the block chain. That both avoids bloating the block chain, and makes small transactions easier to process.
> the value over which some country's national labs or universities turn on their supercomputers and mine almost everything
Custom chips (ASICs) that do nothing but the particular calculation for bitcoin mining are 100 times more efficient than GPU's, and 1000's of times more efficient than general CPUs. Supercomputers are useless for bitcoin mining. The world's top 500 supercomputers combined process 250 million GFLOPS ( http://www.top500.org/statistics/perfdevel/ ). The Bitcoin Network at the moment is running at 78 billion GFLOPs, which is over 300 times faster. Custom hardware and monetary incentive wins big time. The downside is the ASICs are absolutely useless for any other calculation, because it is hardwired into the chip.