Bloomberg LLC is. They invested in venture company Andreessen-Horowitz, who in turn put $25 million into Coinbase, a company that processes merchant payments in bitcoin and deposits local currency to their bank account. They also have 1 million online wallets and sell bitcoins to individuals. Bloomberg TV does a lot of stories about bitcoin these days.
2) Storing your bitcoins on a server owned by someone else is like giving your cash to someone you dont know.
My analogy is "Bitcoin exchanges are like having sex with an alligator. You want to withdraw as soon as you are finished, or else you might get bitten."
Well, my copy from BitcoinQt is 17.2 GB, but that's because it has indexes so it can search the actual transactions faster. Still, that's only $0.65 of hard drive space, not a big deal. What will happen eventually, when it gets too big, is a bunch of people subscribe to a dedicated server with lots of storage, and pay for it with bitcoin. They can load the software themselves, and then compare it to other copies of the block chain to make sure they are identical
> If the blockchain is pruned, what is to keep someone from creating duplicate/counterfeit BitCoins that descend directly from the prune section?
Bitcoins can only be created when you find a hash for a new block. You would only prune transactions which have spent all their outputs. Therefore they have no balances left, and counterfeit balances descended from the pruned transactions would be zero. The block chain prevents double spending because you have a full record of where every balance currently is. Pruning doesn't change that, it only drops the transactions that are zeroed out by later transactions and thus no longer matter. You can check the pruned total against the latest block number, from which the current total of issued coins can be calculated. If they differ, your data is invalid.
Bitcoin "addresses" are unique. They are derived from several rounds of hashing functions on the private key of of a public-key encryption pair. Addresses hold some bitcoin balance amount, which is recorded to 8 decimal places. Bitcoin transactions move some amount of balance from one or more input addresses to one or more output addresses. The private key is required to digitally sign a transaction, so whoever knows that key, can spend the coins they control. Bitcoin "wallets" are files that contain as many keys as needed. Since they are 256 bit keys, one file can hold as many as you need.
Transactions are broadcast across a peer-to-peer network. They are collected by "miners" into "blocks" who attempt to find a low-valued hash for the block by varying the random number, where the data being hashed is [hash of previous block + hash of current block's transactions + random number]. How low the hash value needs to be is adjusted so the whole network finds one every ten minutes on average. Whoever finds the hash value first broadcasts the new block to the network, and everyone running the software updates their copy of the "Block Chain", the set of all blocks containing all past transactions.
Thus everyone has a complete history of all transactions, and every bitcoin amount can be tracked across all the transactions it has been involved with. Each block has a special "coin generation" transaction, which creates 25 new coins, and sends them to the miner's own address. Those 25 coins are worth $14,000 at today's rates, which drives the whole mining operation. Miners compete to find the next block, and claim the 25 new coins.
Since blocks are hard to create, and each block contains the previous block's hash value as data, they form a chained history which is effectively impossible to edit. Any change to any data invalidates the hash recorded in the next block, and every one after it. That is the innovation contained in bitcoin: digital data you can't edit. It is highly useful for recording financial transactions, but it can also be used for any other kind of data you don't want to change.
So not only does everyone have a copy of all past transactions, nobody can change them, because that would take all the computation power consumed since the point you want to change, and all the computation power is busy writing new blocks to earn the rewards of new coins.
The Zimbabwe dollar no longer exists. They use US dollars as their currency now. By that standard, bitcoin is way ahead, it still exists, and is up 1,682% (17.2 times) over one year ago today.
> People who sold things for BitCoins (BTC) and haven't moved them into a hard currency
Pretty much every merchant prices their products in local currency (i.e dollars, euro, etc.) and uses a "payment processor" to provide an exchange rate via software, and convert the bitcoin payment on the fly to their local currency. So there is no currency risk. This kind of service is necessary until use of bitcoin is widespread enough to make it as stable as other foreign currencies. Foreign currencies do fluctuate against each other, and anybody that does international sales has to account for it.
The value of the Bitcoin Network (as distinct from the currency token) is in the ability to move money quickly, with low fees. To illustrate, when I buy bitcoins at https://coinbase.com/ it takes 4 days for the ACH transfer from my bank to clear, but 1 hour for the transfer of bitcoins from Coinbase to my PC wallet to clear. Coinbase paid 11.2 cents in transaction fees to send me my coins. PayPal would charge $4.52 for the same value transaction.
Since the only way to use the Bitcoin Network is to get some of the tokens, demand to move money drives demand to buy the tokens. The price of the tokens is set by daily supply and demand, because there are only a finite number of them (12.4 million now, 21 million eventually). They can be subdivided to the 10 nano-bitcoin level ( called a "Satoshi"), but the total number is limited.
On top of the intended use to transfer money, people do speculate on future demand, and hence future price. But that's like speculating on wheat in the commodities market. The primary use for wheat is to make baked goods, day trading is just froth on top of the actual useful purpose of wheat.
The Earth is not a closed system, either materially or energetically. We can also leave it and utilize the resources outside the Earth. Communications satellites already do this. They tap a tiny fraction of the Sun's energy that misses the Earth.
This Senator is too dumb to properly define what a cryptocurrency is, so no, he didn't.
He played football in college, but had to quit because of injuries. My guess is one too many concussions from tackles in an era before proper helmets (he's 70 years old now). Just like Muhammed Ali, he can smile for the camera, but is a few cards short of a full deck.
> Makes me kind of wonder about the identiy of Satoshi Nakomoto.
Makes a lot of people wonder. Likely he was properly paranoid and used good security. Otherwise someone would have tracked him down and used rubber hose cryptography on him. He is estimated to hold ~1,000,000 bitcoins, from being the very first miner and it was trivially easy to mine back then. At today's rates that is worth $600 million. Definitely worth a criminal enterprise's time to figure out who it is. Since his original coins have never been spent (the Block Chain proves it), this has likely not happened.
Almost no modern currencies are "backed" by anything.
You are quite wrong in this. The US Dollar is almost entirely backed by debt. In order to obtain paper money (Federal Reserve Notes), a bank must deposit adequate collateral, such as Treasury Bonds. When banks do fractional reserve lending, and increase the money supply, the additional book-entry dollars are now backed by loans from the bank. The exception to this are the gold certificates held by the Fed, which nominally are backed by Treasury vault gold. Since they are not allowed to exchange the certificates for physical gold, it is arguable that they are backed by nothing, and the gold was confiscated by the US government. Gold certificates at market exchange rates are worth $400 billion, which is only about 4% of the M2 money supply, so they are not a big factor either way. The rest is debt.
Of course, bankers like a system where money is backed by debt, since money and debt are their business, and they can make it a growth business. Money backed by precious metals would be the business of mining companies, and growth is limited by physical supply.
> For example, I think it has potential for a "free" way to do high volume B2B settlement among international entities... but I never hear anyone talk about this.
If you mean mainstream media, they are clueless about other uses for bitcoin besides speculation and buying drugs. The core innovation in bitcoin is using chained hashes with proof-of-work to create provably unaltered databases. Bitcoin happens to use it to record monetary transactions, but the same technology can be used to record *any type of data whatsoever*. Think about that for a minute. You can encode a business contract with a currency payment script included (bitcoin transactions are actually scripts, you can program them). Then when one party completes their side of the contract, they automatically get paid. No having to send an invoice, wait for the check in the mail, etc.
I'm working on distributed automated production (https://en.wikibooks.org/wiki/Seed_Factories/WWF), where different automated machines with different owners produce parts of a product. A method like the above would be an excellent low-overhead way to coordinate work across a network. But hubris and being brought low is a classic story, so the fall of Mt.Gox or Silk Road is a much more attractive story to the media (who are basically story-tellers). The work of making production more efficient doesn't make the news, and your basic bitcoin saving retailers 5% on sales barely rates a mention. That comes from reduced bank fees, fraud, and chargebacks.
> Developing useful software robots is a whole lot cheaper and easier than building and programming meatspace robots
Google also bought Boston Dynamics ( http://www.theverge.com/2013/1... ), who make very meatspace robots - in fact their robots are modeled on animals.
> There is no way for anyone to gain anything from those coins without a publicly viewable transaction appearing in the blockchain.
This is incorrect. Each of the early blocks that were mined went to a different bitcoin address, so they hold 50 BTC each. Each address has a different secret key associated with it. The original miner can exchange the secret key for cash, without making a bitcoin transaction. Of course, since the original miner also knows the secret key, they could still spend those coins, so doing a private sale like that would involve trust.
On a larger scale, the original miner could enter into a partnership, with adequate legal protections. They would sell a part ownership of all the coins in return for some money, and again not have to move the coins.
Just hold it in front of the anti-aircraft radar for 30 seconds.
There's a reason the first microwave ovens were called "Radaranges" (http://www.radar58.com/radarange/radar.html), and were made by the Amana division of Raytheon, a military radar manufacturer.
That limit is set by the finite size of a transaction (~ 250 bytes), and the hard limit of 1 MB per block in the block chain. Thus you can fit 4,000 transactions/block. Blocks are generated every 10 minutes (600 seconds) on average, thus ~7 per second.
The block size limit is intended to not overwhelm average PC's running a full bitcoin client (i.e. a node on the bitcoin network). There are several ways to deal with this limit. One is simply to gradually increase it, and migrate from user PC's to a distributed network of servers with more processing capacity. Another is "off chain transactions". For example, Coinbase.com has both 940,000 consumer wallets and 23,000 merchant accounts. So if a Coinbase user shops at a Coinbase merchant, the transfer is internal to their books, and does not need to hit the network. Eventually other aggregators can bundle up multiple user transactions and send it on the public block chain as a single large transaction to another aggregator. The details of who gets what amount can travel as a separate data file between them.
That's pretty much what happens in the traditional banking system. Banks settle up with each other once a day at a clearing house (usually the district Federal Reserve Bank). They add up all the day's checks going between a pair of banks, and then one of them pays the other the net difference. The actual payment goes across a private payment network (FEDwire) that only financial institutions have access to. In the old days, they had to swap piles of physical checks at the clearing house. With modern debit cards and electronic payments, it goes through an "Automated Clearing House" (ACH) which tallies up the amounts, but it is the same idea - lots of small transactions aggregated into one big daily clearing of the net balance between banks.
Do you think the idea of chained-hash record-keeping with proof-of-work is retarded? That's what allows bitcoin to keep a history of transactions which cannot be fiddled with, by anyone. Bitcoin happens to be the first implementation, but it can be used for any kind of digital data whatsoever. With this method, you can prove the data has not been tampered with or accidentally been changed (i.e. software or hardware errors). I'd say that is the opposite of retarded, it's very advanced and useful.
Do you think that money that only exists as data in a computer is retarded? Did you know that 88% of US dollars are that way? And that the vast majority of them are backed by other digital assets? (Mostly loans and Treasury bonds).
If not these, then which part do you find retarded?
The Hongkong and Shanghai Banking Corporation (HSBC) was founded by a Scotsman in 1865 to take advantage of the opening of trade with China, including the opium trade. They have been laundering money for drug pushers from the start, back when the British were the drug pushers.
> The question is, will they continue to go up, or will they crash and burn.
Bitcoins are useless without the payment network of which they are a part. The network moves money from one person to another. The value of one bitcoin unit is then driven by demand to use the network. A year ago, BitPay, a merchant processor, had 2400 merchants signed up. Now they have over 20,000. If that kind of growth rate is sustained, the coin will also go up.
About half a million people hold a significant amount of bitcoins, where "significant" means > US $80, an amount of cash a person might keep in a physical wallet:
Over time the early adopters will spend some of their coins, otherwise what's the point? You can't eat bitcoins. So the distribution will tend to approach that of any other asset in the world. The exact same thing happens to the founders of any successful tech company - the early employees end up with a big share of the company.
This is a complete misunderstanding of how the bitcoin network works. Individual transactions go out from the sender across the P2P network. Each node checks the transaction sending address against past transactions to see if it has enough balance. If the first one to arrive depletes the balance, the later ones get rejected and not passed along to other nodes. Each node can do this because it has a complete history of bitcoin transactions in the block chain + a memory pool of recently arrived transactions not yet in a block.
The relay time per node averages about 1 second. If there is as much as 5 seconds variance among the scammers, only one transaction will get relayed across most of the network. Miners receive transactions like everyone else on the P2P network. When they find a valid hash for a block of transactions, they send it back out to everyone else. Each node then verifies the hash is legitimate, and if so adds it to the growing "block chain", and subtracts the included transactions from the memory pool. But the node had the transaction within seconds of it being first sent. A block just means the contents of the transaction are now backed by a lot of computation, therefore it will be hard to ever change in the future. The hashes are chained by including each hash as part of the data for the next block. Thus as more blocks get added, a given transaction would require repeating all the computation that has happened since to change it, which gets increasingly unlikely. But double-spending is mostly prevented within seconds, because nodes won't forward a transaction that doesn't have enough funds to cover it.
Checking for double spending happens with each node in the bitcoin network as it relays the transaction. This takes seconds. Each node compares a given transaction as it arrives to the past transactions for that sending address. If there is not enough balance, it dumps the transaction. Nodes can do that because they have a complete history of past transactions (the Block Chain) and a memory pool of recently arrived transactions not yet in a block. Since transactions typically go through ~5 nodes from sender to everyone on the network, transactions are checked multiple times. Thus the incidence of *attempted* double-spends are less than 1 in 10,000. Successful ones are much less frequent.
When a hash for a new block is discovered by miners, they send it out over the same P2P network that relays individual transactions (that is how they get the transactions to put in a block in the first place). Each node then verifies the hash is correct, and adds it to their copy of the Block Chain. Then they delete the transactions in their memory pool that are now in the block.
Your statement "It's simple to double spend" is incorrect for a number of reasons. Someone has to hack their wallet software to allow it, then relay a transaction by different paths, because only the first arrival at a given node is allowed. Inevitably miners will accept only one of the transactions into a block, and whichever arrives first is the one they work with. Unless the sender manages to balance the double spends evenly across different parts of the network, most likely only one of them will reach the majority of miners, and thus get put in a block. The other one will get filtered by nodes before it even gets to the miners. Doing a double-spend while in line at Target is difficult because you are using a portable device which links to the internet through a single path. Even if you had a hacked app that sends your money to Target *and* another of your own addresses simultaneously, your nearest nodes that you relay the transaction through will have variable delays, and one of them will get one of the transactions out faster. If it's not the one to Target, they won't see the payment arrive at all, and tell you to try again.
If you are selling a car or a house, it would be wise to wait for a number of confirmations, and in addition check that the balance in the sending address is "mature" (over an hour old). But for small scale store checkout, zero confirmations are quite enough. The risk is much lower than "shrinkage" (theft by store employees mostly), and the fees, fraud rates, and charge-backs are way lower than for bank card transactions.
> "I'll take bitcoins, but you only get your bread once the transaction clears"
You don't need to wait that long. For a transaction to reach the seller's computer, it has to be relayed through the network. Each node compares the transaction against the balance for that address, as recorded in the block chain plus recent transactions not yet in a block. If there isn't enough balance, the transaction isn't relayed further, it's dropped. Thus the incidence of "double spending" (trying to spend a balance you don't have) is less than 1 attempt per 10,000 transactions.
For buying a loaf of bread, that risk is low enough for the shop owner to ignore. "Confirmations" happen when the transaction is included in a block, and then added blocks are chained after it. Since each block takes a rather large amount of computation to find a valid hash, and the hashes are chained, undoing a transaction takes more and more work over time, becoming exponentially less likely. If you were buying a car or a house you would be wise to wait for some number of confirmations, but not for a loaf of bread, or other small transaction.
Slashdot Mirror
Bloomberg LLC is. They invested in venture company Andreessen-Horowitz, who in turn put $25 million into Coinbase, a company that processes merchant payments in bitcoin and deposits local currency to their bank account. They also have 1 million online wallets and sell bitcoins to individuals. Bloomberg TV does a lot of stories about bitcoin these days.
2) Storing your bitcoins on a server owned by someone else is like giving your cash to someone you dont know.
My analogy is "Bitcoin exchanges are like having sex with an alligator. You want to withdraw as soon as you are finished, or else you might get bitten."
Well, my copy from BitcoinQt is 17.2 GB, but that's because it has indexes so it can search the actual transactions faster. Still, that's only $0.65 of hard drive space, not a big deal. What will happen eventually, when it gets too big, is a bunch of people subscribe to a dedicated server with lots of storage, and pay for it with bitcoin. They can load the software themselves, and then compare it to other copies of the block chain to make sure they are identical
> If the blockchain is pruned, what is to keep someone from creating duplicate/counterfeit BitCoins that descend directly from the prune section?
Bitcoins can only be created when you find a hash for a new block. You would only prune transactions which have spent all their outputs. Therefore they have no balances left, and counterfeit balances descended from the pruned transactions would be zero. The block chain prevents double spending because you have a full record of where every balance currently is. Pruning doesn't change that, it only drops the transactions that are zeroed out by later transactions and thus no longer matter. You can check the pruned total against the latest block number, from which the current total of issued coins can be calculated. If they differ, your data is invalid.
Bitcoin "addresses" are unique. They are derived from several rounds of hashing functions on the private key of of a public-key encryption pair. Addresses hold some bitcoin balance amount, which is recorded to 8 decimal places. Bitcoin transactions move some amount of balance from one or more input addresses to one or more output addresses. The private key is required to digitally sign a transaction, so whoever knows that key, can spend the coins they control. Bitcoin "wallets" are files that contain as many keys as needed. Since they are 256 bit keys, one file can hold as many as you need.
Transactions are broadcast across a peer-to-peer network. They are collected by "miners" into "blocks" who attempt to find a low-valued hash for the block by varying the random number, where the data being hashed is [hash of previous block + hash of current block's transactions + random number]. How low the hash value needs to be is adjusted so the whole network finds one every ten minutes on average. Whoever finds the hash value first broadcasts the new block to the network, and everyone running the software updates their copy of the "Block Chain", the set of all blocks containing all past transactions.
Thus everyone has a complete history of all transactions, and every bitcoin amount can be tracked across all the transactions it has been involved with. Each block has a special "coin generation" transaction, which creates 25 new coins, and sends them to the miner's own address. Those 25 coins are worth $14,000 at today's rates, which drives the whole mining operation. Miners compete to find the next block, and claim the 25 new coins.
Since blocks are hard to create, and each block contains the previous block's hash value as data, they form a chained history which is effectively impossible to edit. Any change to any data invalidates the hash recorded in the next block, and every one after it. That is the innovation contained in bitcoin: digital data you can't edit. It is highly useful for recording financial transactions, but it can also be used for any other kind of data you don't want to change.
So not only does everyone have a copy of all past transactions, nobody can change them, because that would take all the computation power consumed since the point you want to change, and all the computation power is busy writing new blocks to earn the rewards of new coins.
The Zimbabwe dollar no longer exists. They use US dollars as their currency now. By that standard, bitcoin is way ahead, it still exists, and is up 1,682% (17.2 times) over one year ago today.
> People who sold things for BitCoins (BTC) and haven't moved them into a hard currency
Pretty much every merchant prices their products in local currency (i.e dollars, euro, etc.) and uses a "payment processor" to provide an exchange rate via software, and convert the bitcoin payment on the fly to their local currency. So there is no currency risk. This kind of service is necessary until use of bitcoin is widespread enough to make it as stable as other foreign currencies. Foreign currencies do fluctuate against each other, and anybody that does international sales has to account for it.
The value of the Bitcoin Network (as distinct from the currency token) is in the ability to move money quickly, with low fees. To illustrate, when I buy bitcoins at https://coinbase.com/ it takes 4 days for the ACH transfer from my bank to clear, but 1 hour for the transfer of bitcoins from Coinbase to my PC wallet to clear. Coinbase paid 11.2 cents in transaction fees to send me my coins. PayPal would charge $4.52 for the same value transaction.
Since the only way to use the Bitcoin Network is to get some of the tokens, demand to move money drives demand to buy the tokens. The price of the tokens is set by daily supply and demand, because there are only a finite number of them (12.4 million now, 21 million eventually). They can be subdivided to the 10 nano-bitcoin level ( called a "Satoshi"), but the total number is limited.
On top of the intended use to transfer money, people do speculate on future demand, and hence future price. But that's like speculating on wheat in the commodities market. The primary use for wheat is to make baked goods, day trading is just froth on top of the actual useful purpose of wheat.
If you live in Cyprus, this statement is false. Depositors lost a lot.
The Earth is not a closed system, either materially or energetically. We can also leave it and utilize the resources outside the Earth. Communications satellites already do this. They tap a tiny fraction of the Sun's energy that misses the Earth.
This Senator is too dumb to properly define what a cryptocurrency is, so no, he didn't.
He played football in college, but had to quit because of injuries. My guess is one too many concussions from tackles in an era before proper helmets (he's 70 years old now). Just like Muhammed Ali, he can smile for the camera, but is a few cards short of a full deck.
> Makes me kind of wonder about the identiy of Satoshi Nakomoto.
Makes a lot of people wonder. Likely he was properly paranoid and used good security. Otherwise someone would have tracked him down and used rubber hose cryptography on him. He is estimated to hold ~1,000,000 bitcoins, from being the very first miner and it was trivially easy to mine back then. At today's rates that is worth $600 million. Definitely worth a criminal enterprise's time to figure out who it is. Since his original coins have never been spent (the Block Chain proves it), this has likely not happened.
Almost no modern currencies are "backed" by anything.
You are quite wrong in this. The US Dollar is almost entirely backed by debt. In order to obtain paper money (Federal Reserve Notes), a bank must deposit adequate collateral, such as Treasury Bonds. When banks do fractional reserve lending, and increase the money supply, the additional book-entry dollars are now backed by loans from the bank. The exception to this are the gold certificates held by the Fed, which nominally are backed by Treasury vault gold. Since they are not allowed to exchange the certificates for physical gold, it is arguable that they are backed by nothing, and the gold was confiscated by the US government. Gold certificates at market exchange rates are worth $400 billion, which is only about 4% of the M2 money supply, so they are not a big factor either way. The rest is debt.
Of course, bankers like a system where money is backed by debt, since money and debt are their business, and they can make it a growth business. Money backed by precious metals would be the business of mining companies, and growth is limited by physical supply.
> For example, I think it has potential for a "free" way to do high volume B2B settlement among international entities... but I never hear anyone talk about this.
If you mean mainstream media, they are clueless about other uses for bitcoin besides speculation and buying drugs. The core innovation in bitcoin is using chained hashes with proof-of-work to create provably unaltered databases. Bitcoin happens to use it to record monetary transactions, but the same technology can be used to record *any type of data whatsoever*. Think about that for a minute. You can encode a business contract with a currency payment script included (bitcoin transactions are actually scripts, you can program them). Then when one party completes their side of the contract, they automatically get paid. No having to send an invoice, wait for the check in the mail, etc.
I'm working on distributed automated production (https://en.wikibooks.org/wiki/Seed_Factories/WWF), where different automated machines with different owners produce parts of a product. A method like the above would be an excellent low-overhead way to coordinate work across a network. But hubris and being brought low is a classic story, so the fall of Mt.Gox or Silk Road is a much more attractive story to the media (who are basically story-tellers). The work of making production more efficient doesn't make the news, and your basic bitcoin saving retailers 5% on sales barely rates a mention. That comes from reduced bank fees, fraud, and chargebacks.
> Developing useful software robots is a whole lot cheaper and easier than building and programming meatspace robots
Google also bought Boston Dynamics ( http://www.theverge.com/2013/1... ), who make very meatspace robots - in fact their robots are modeled on animals.
> There is no way for anyone to gain anything from those coins without a publicly viewable transaction appearing in the blockchain.
This is incorrect. Each of the early blocks that were mined went to a different bitcoin address, so they hold 50 BTC each. Each address has a different secret key associated with it. The original miner can exchange the secret key for cash, without making a bitcoin transaction. Of course, since the original miner also knows the secret key, they could still spend those coins, so doing a private sale like that would involve trust.
On a larger scale, the original miner could enter into a partnership, with adequate legal protections. They would sell a part ownership of all the coins in return for some money, and again not have to move the coins.
Just hold it in front of the anti-aircraft radar for 30 seconds.
There's a reason the first microwave ovens were called "Radaranges" (http://www.radar58.com/radarange/radar.html), and were made by the Amana division of Raytheon, a military radar manufacturer.
That limit is set by the finite size of a transaction (~ 250 bytes), and the hard limit of 1 MB per block in the block chain. Thus you can fit 4,000 transactions/block. Blocks are generated every 10 minutes (600 seconds) on average, thus ~7 per second.
The block size limit is intended to not overwhelm average PC's running a full bitcoin client (i.e. a node on the bitcoin network). There are several ways to deal with this limit. One is simply to gradually increase it, and migrate from user PC's to a distributed network of servers with more processing capacity. Another is "off chain transactions". For example, Coinbase.com has both 940,000 consumer wallets and 23,000 merchant accounts. So if a Coinbase user shops at a Coinbase merchant, the transfer is internal to their books, and does not need to hit the network. Eventually other aggregators can bundle up multiple user transactions and send it on the public block chain as a single large transaction to another aggregator. The details of who gets what amount can travel as a separate data file between them.
That's pretty much what happens in the traditional banking system. Banks settle up with each other once a day at a clearing house (usually the district Federal Reserve Bank). They add up all the day's checks going between a pair of banks, and then one of them pays the other the net difference. The actual payment goes across a private payment network (FEDwire) that only financial institutions have access to. In the old days, they had to swap piles of physical checks at the clearing house. With modern debit cards and electronic payments, it goes through an "Automated Clearing House" (ACH) which tallies up the amounts, but it is the same idea - lots of small transactions aggregated into one big daily clearing of the net balance between banks.
Do you think the idea of chained-hash record-keeping with proof-of-work is retarded? That's what allows bitcoin to keep a history of transactions which cannot be fiddled with, by anyone. Bitcoin happens to be the first implementation, but it can be used for any kind of digital data whatsoever. With this method, you can prove the data has not been tampered with or accidentally been changed (i.e. software or hardware errors). I'd say that is the opposite of retarded, it's very advanced and useful.
Do you think that money that only exists as data in a computer is retarded? Did you know that 88% of US dollars are that way? And that the vast majority of them are backed by other digital assets? (Mostly loans and Treasury bonds).
If not these, then which part do you find retarded?
The Hongkong and Shanghai Banking Corporation (HSBC) was founded by a Scotsman in 1865 to take advantage of the opening of trade with China, including the opium trade. They have been laundering money for drug pushers from the start, back when the British were the drug pushers.
You seem to have missed the 400 MW Ivanpah solar thermal plant just west of Las Vegas: http://ivanpahsolar.com/
Actually, they were $13.50 at the start of 2013.
> The question is, will they continue to go up, or will they crash and burn.
Bitcoins are useless without the payment network of which they are a part. The network moves money from one person to another. The value of one bitcoin unit is then driven by demand to use the network. A year ago, BitPay, a merchant processor, had 2400 merchants signed up. Now they have over 20,000. If that kind of growth rate is sustained, the coin will also go up.
About half a million people hold a significant amount of bitcoins, where "significant" means > US $80, an amount of cash a person might keep in a physical wallet:
http://bitcoinrichlist.com/cha...
Over time the early adopters will spend some of their coins, otherwise what's the point? You can't eat bitcoins. So the distribution will tend to approach that of any other asset in the world. The exact same thing happens to the founders of any successful tech company - the early employees end up with a big share of the company.
> because by 10:40AM they will get caught.
This is a complete misunderstanding of how the bitcoin network works. Individual transactions go out from the sender across the P2P network. Each node checks the transaction sending address against past transactions to see if it has enough balance. If the first one to arrive depletes the balance, the later ones get rejected and not passed along to other nodes. Each node can do this because it has a complete history of bitcoin transactions in the block chain + a memory pool of recently arrived transactions not yet in a block.
The relay time per node averages about 1 second. If there is as much as 5 seconds variance among the scammers, only one transaction will get relayed across most of the network. Miners receive transactions like everyone else on the P2P network. When they find a valid hash for a block of transactions, they send it back out to everyone else. Each node then verifies the hash is legitimate, and if so adds it to the growing "block chain", and subtracts the included transactions from the memory pool. But the node had the transaction within seconds of it being first sent. A block just means the contents of the transaction are now backed by a lot of computation, therefore it will be hard to ever change in the future. The hashes are chained by including each hash as part of the data for the next block. Thus as more blocks get added, a given transaction would require repeating all the computation that has happened since to change it, which gets increasingly unlikely. But double-spending is mostly prevented within seconds, because nodes won't forward a transaction that doesn't have enough funds to cover it.
Checking for double spending happens with each node in the bitcoin network as it relays the transaction. This takes seconds. Each node compares a given transaction as it arrives to the past transactions for that sending address. If there is not enough balance, it dumps the transaction. Nodes can do that because they have a complete history of past transactions (the Block Chain) and a memory pool of recently arrived transactions not yet in a block. Since transactions typically go through ~5 nodes from sender to everyone on the network, transactions are checked multiple times. Thus the incidence of *attempted* double-spends are less than 1 in 10,000. Successful ones are much less frequent.
When a hash for a new block is discovered by miners, they send it out over the same P2P network that relays individual transactions (that is how they get the transactions to put in a block in the first place). Each node then verifies the hash is correct, and adds it to their copy of the Block Chain. Then they delete the transactions in their memory pool that are now in the block.
Your statement "It's simple to double spend" is incorrect for a number of reasons. Someone has to hack their wallet software to allow it, then relay a transaction by different paths, because only the first arrival at a given node is allowed. Inevitably miners will accept only one of the transactions into a block, and whichever arrives first is the one they work with. Unless the sender manages to balance the double spends evenly across different parts of the network, most likely only one of them will reach the majority of miners, and thus get put in a block. The other one will get filtered by nodes before it even gets to the miners. Doing a double-spend while in line at Target is difficult because you are using a portable device which links to the internet through a single path. Even if you had a hacked app that sends your money to Target *and* another of your own addresses simultaneously, your nearest nodes that you relay the transaction through will have variable delays, and one of them will get one of the transactions out faster. If it's not the one to Target, they won't see the payment arrive at all, and tell you to try again.
If you are selling a car or a house, it would be wise to wait for a number of confirmations, and in addition check that the balance in the sending address is "mature" (over an hour old). But for small scale store checkout, zero confirmations are quite enough. The risk is much lower than "shrinkage" (theft by store employees mostly), and the fees, fraud rates, and charge-backs are way lower than for bank card transactions.
> "I'll take bitcoins, but you only get your bread once the transaction clears"
You don't need to wait that long. For a transaction to reach the seller's computer, it has to be relayed through the network. Each node compares the transaction against the balance for that address, as recorded in the block chain plus recent transactions not yet in a block. If there isn't enough balance, the transaction isn't relayed further, it's dropped. Thus the incidence of "double spending" (trying to spend a balance you don't have) is less than 1 attempt per 10,000 transactions.
For buying a loaf of bread, that risk is low enough for the shop owner to ignore. "Confirmations" happen when the transaction is included in a block, and then added blocks are chained after it. Since each block takes a rather large amount of computation to find a valid hash, and the hashes are chained, undoing a transaction takes more and more work over time, becoming exponentially less likely. If you were buying a car or a house you would be wise to wait for some number of confirmations, but not for a loaf of bread, or other small transaction.