Researchers Find Problems With Rules of Bitcoin

holy_calamity (872269) writes "Using game theory to analyze the rules of cryptocurrency Bitcoin suggests some changes are needed to make the currency sustainable in the long term, reports MIT Technology Review. Studies from Princeton and Cornell found that current rules governing the mining of bitcoins leave room for cheats or encourage behavior that could destabilize the currency. Such changes could be difficult to implement, given the fact Bitcoin — by design — lacks any central authority." The main problem discovered is that transaction fees do not provide enough incentive to continue operating as "miner" after there are no more bitcoins left to be mined.

Comments

That main issue is actually the solution.

[Kremmy]

After all of the bitcoins are mined, there is no longer an incentive to treat it in this goldrush-like manner. The only people who will have reason to run a miner are the people who use bitcoins as a currency, to be a node in their decentralized economy. Most of the problems people describe seem to be directly related to its use as a pump and dump, actually. I must wonder what's going to happen once we reach that point.

Re:That main issue is actually the solution.

[iluvcapra]

The problem with transaction fees is there's no way to properly market them-- theoretically the higher a transaction fee you pay will give you a higher quality of service, but in practice the terms under which your transaction is processed are completely voluntary. It might happen, it might not, and it's definitely in the interests of large mining guilds to run up the price, and the large guilds are very effective at locking out upstarts. A cartel of two of them would easily control a majority of the blocks that get signed onto the chain, and thus set the price of transaction processing.

Way back when ...

[Taco Cowboy]

Back in the 1920's when that great depression struck, many banks folded, and people who had money in banks ended up with nothing.

No matter for what reason the banks folded depositors were the ones left holding the empty bag.

Kinda like what is happening in the various Bitcoin exchanges. No matter if it's stupidity, lack of security, or malice, it's the depositors (whoever parked their Bitcoins in that exchange) ended up losing it all.

Well ... back to the 1920's.

When the banks folded, did people abandon the greenbacks ? Yes or no ?

Same situation here ... The fact that exchanges vanishing into thin air doesn't render Bitcoins invalid.

True, some of the "rules" are flawed ( I kinda have a sense something is amissed ever since Bitcoin came out, back in 2009, but I just couldn't pin-point what is wrong with it, but thanks to those scientists at least now I know, but I digress ... ) and they may need to be changed ( ... as been pointed out, the implementation of the necessary rule change may turn out to be very hard ... ) but all in all, the system of Bitcoin, at least, for the concept of it, is still as valid as ever.

Many people are digging at Bitcoin, trying their best to make it sounds as if it's something uncertain, something ephemeral, something "flash in the pan" but if we are to look at the alternative to Bitcoin, ie, the FIAT MONEY SYSTEM, it too has been damaged beyond repair --- as so much money was created out of thin air, which means, the value of the fiat money is no longer valid.

Re:Way back when ...

[Anna Merikin]

Geeks who run with anarchists will be the first the anarchists turn on when "authorities" are gone. The greenback has an important phrase printed thereon "For all debts public and private" (within the USA.) Bitcoin has no such mandate.

And,. yes, people did abandon the greenback in the sense the greenback worth .05 oz. of gold was replaced by one worth .028 oz. in 1934.

Two hundred-thirty-some years after independence, dollars are still circulating because people believe in them. Still, there are those old-fashioned enough to disbelieve in "new" currencies and hoard an even more ancient and worthless material -- gold. And there are nearly three billion people who live in nations where gold is more desired than fiat currencies.

The world does not move as fast as true-believing miners would have us believe. Those who drink the crypto-curremcy kool-aid are clearly operating out of some fervor based entirely on faith, not logic.

That's quite OK, as economics is simply applied mass psychology, more or less, and not a hard science. So one can excuse geeks' lack of understanding of the subject. But to ignore the impolsion of this particular crypto currency at this time is absurd.