> You can never create anything new without building on the past.
That's an argument for limited copyright terms. Society grants you free use of all the pre-existing stuff, in return for adding your contribution to the free pool after a certain time. You get a short time for exclusive distribution as an incentive. If you want perpetual copyright, you can't have used anything provided by society, starting with things like language and music notation. Yeah, Disney, society lets you use those fairy tales, and the motion picture camera, and lots of other stuff. Now give something back.
What you are talking about is called "international remittances" (sending money internationally person-to-person). It's a $500 billion/year activity, and the average fees are 9 percent! This is the killer app for bitcoin at the moment.
> The problem is; much economic activity is unlikely to happen, if the currency is indeed deflationary
Reality disagrees. First, in the past year the exchange rate for bitcoins has gone up 70 times (extreme deflation), while the number of merchants accepting bitcoin has risen 12 times. Second, if adopted on a mass scale (which it is not, yet), people will still need to pay for shelter, food, and utilities, regardless if it's deflationary or inflationary. Third, bitcoin is currently inflationary, at the rate of 11% a year in theoretical coin production, and higher in reality since "mining" (block generation) is above the theoretical rate.
> what elements of contract law are present in bitcoin that would enforce payment if the bitcoins have been tapped out before you got payment?
The same elements of contract law that apply for any other contract. If you make a contract with "unknown user on the internet", it's likely to be unenforceable no matter what currency unit you choose. If you make it with a known person, get their signature, and specify "X Dollars worth of bitcoins at the time of payment", then you are covered like anything else if they breach the contract.
> We have no idea what Satoshi's success criteria were
It's clearly stated in his original paper (http://bitcoin.org/bitcoin.pdf):
"What is needed is an electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party. Transactions that are computationally impractical to reverse would protect sellers from fraud, and routine escrow mechanisms could easily be implemented to protect buyers. In this paper, we propose a solution to the double-spending problem using a peer-to-peer distributed timestamp server to generate computational proof of the chronological order of transactions. The system is secure as long as honest nodes collectively control more CPU power than any cooperating group of attacker nodes."
If the actual Bitcoin network meets the above criteria, it is a success.
> Frankly I'm surprised BitCoin still has value after SilkRoad's demise.
You shouldn't be. The Silk Road indictment reveals their sales represented only 5% of total bitcoin transactions over the period they operated.
There are now at least 24,000 merchants using bitcoin - that's the number using the two largest payment processors, Coinbase and BitPay. You can also buy gift cards for hundreds of major stores with bitcoin through Gyft and eGifter. That's a big channel to spend bitcoins, even if the stores themselves don't take it directly.
The Euro and Dollar are the largest world currencies. In the last 10 years the Euro has varied from $1.17 to $1.59, and made that rise in 2.75 years (+11.8%/year) The steepest drop seems to be 4 months from Jul to Nov 2008, when it dropped from $1.59 to $1.25 (-48.5%/year rate).
Admittedly, bitcoin has a long way to go to reach that level of stability, but currencies are not as stable as you think.
> "no bank or bitcoin-emitter can be as public-minded as a government,"
On the contrary, banks and governments can ignore the people, when they are too big or powerful. Bitcoin, and businesses that use it, have to compete on service and security else people will move to a better option. You can't ditch your government without a whole lot of effort.
> eventually enough coins will be lost that bitcoins will become useless.
The smallest units in the bitcoin database are called "Satoshi". There are 100 million of them per full bitcoin, thus 2.1 quadrillion Satoshi can be generated. That can withstand a lot of losses, since it is 63 times all the world's currencies combined if converted to dollar value.
If there are not enough bitcoin units, people can adopt any of the 60 other crypto-currencies that already exist. ( https://www.cryptsy.com/ ) It's not like the world isn't already used to multiple currencies.
Only with a DDOS against the mining pools(easy), or the miner's computers (harder)
The Bitcoin network has a combined hash rate of 63,841.77 Petaflops ( http://bitcoinwatch.com/ ). Unless they buy a ton of the same kind of specialized chips as the mining community has, they don't have a chance at matching that rate. The fastest US Supercomputers rate 17 Petaflops (http://top500.org/lists/2013/11/), thus you would need 3,755 of them. I have no doubt the NSA has some supercomputers in the range of the top DOE machines, but not thousands of them.
The next question is why would the NSA *want* to overwhelm bitcoin? The block chain transaction database is publicly shared across the bitcoin network, and lists *every bitcoin transaction ever made*. That is perfect for cross-correlating with the other data the NSA collects, which is the main job the NSA performs these days, looking for "interesting" data matches. Some people even suspect the NSA *created* bitcoin. It uses ingenious crypto/hash math, and who has more mathematicians than they do? Further, the pseudonym of the creator(s) of bitcoin in Japanese is "Nakamoto SAtoshi". Notice the capitalized letters?
> some economists have horrible visceral reactions to Bitcoin because they they have firm stakes in how the status quo works
I think it has more to do with losing their investment of time and money to understand the current system. Bitcoin makes them as dumb as everyone else who is new to it.
The confusion many people make is between the Bitcoin network, which consists of nodes, software, custom hardware, and a big datbase, and "bitcoins" the unit of measure in the database. The network has value because it performs a useful function - delivering payments quickly and cheaply. The demand for using that network in turn gives database entries value for the part they play in delivering payments. But without the rest of the network, the database would be useless.
Thus the data itself doesn't have much value, any more than a random Excel spreadsheet does, in and of itself. If you *use* a spreadsheet as part of a venture capital deal, it now has value through use. Similarly the Bitcoin database (the block chain) only has value so long as it is used. When people stop using it (along with the rest of the network) the value will be zero, like old game software. Since use is rising quickly, so is the value. Since the number of units in the database is growing slower than usage, then the price per unit will also go up.
2. BTC actively being used for something so they have actual value.
China now has by far the busiest bitcoin exchange. Since there are very few retail places to spend bitcoins in China, they are likely being used to get around currency controls or taxes. For all we know, corrupt Party officials are using them to get their excess bribes offshore.
Demand from China has skyrocketed. Since there are not many consumer places to spend bitcoins in China yet, the demand is some combination of:
* People using it as a savings vehicle * Businesses using it to get around currency controls * Corrupt Party officials and other newly wealthy moving funds out of the country.
If you are referring to Mt.Gox, they aren't the leading exchange any more. BTC China is now the largest, and three others, including Mt.Gox are about even with 20% each. In the US we have Coinbase, who is a "payment processor". They accept bitcoin on behalf of merchants, who get dollars deposited to their account daily. On the other side, Coinbase sells those bitcoins to individuals at market rates. Coinbase isn't an exchange, they sell their coins to you directly. For merchants they remove the currency rate fluctuations and accounting for multiple currencies, since merchants only get dollars, they never touch the bitcoins.
Yes, obviously. At the moment the buyers are from China, as evidenced by BTC China becoming the largest volume exchange. Since there are hardly any places to spend bitcoins at the consumer level in China yet, the assumption is they are being bought to get around currency controls. So the users would be business or corrupt Party officials.
There are other uses for bitcoin that haven't even ramped up yet. For example, sending money internationally to relatives, an $850 billion market, has an average fee of 9% from places like Western Union. That market is just begging to be undercut by bitcoin. However, it takes time to set up a network of currency exchangers, something Western Union already has. Give it a few years.
> "It is well documented in the bitcoin blockchain that Satoshi Nakamoto famously gave away most of the early bitcoins to encourage adaptation."
Actually, it is easy to prove this is false. Look up any random block number below 25,000, which is in the first 6 months of bitcoin's existence. For example:
Follow the "newly generated coins" transaction (the first one in the block) to the destination address, and notice the coins have never moved. They were not given to anyone.
The Silk Road indictment reveals that their sales only amounted to 4.5% of the total bitcoin transactions over the period it operated. That is about the same ratio as paper US dollars used for drug purchases worldwide vs. total spending of paper dollars for all kinds of purchases.
The indictment also mis-values the total Silk Road sales by taking the total number of bitcoin sales (the only currency they accepted) x the market price at the time they seized the site. Bitcoins were worth much less on average during the previous two years, but prosecutors like to inflate the numbers for publicity and shock value. Dread Pirate Robert's stash is worth a lot *now* for the same reason - the value of the coins he got as commission went up a lot. The commissions *at the time of the sales* was nowhere near as much, and neither was the amount of drug sales in dollar terms.
Slashdot Mirror
> You can never create anything new without building on the past.
That's an argument for limited copyright terms. Society grants you free use of all the pre-existing stuff, in return for adding your contribution to the free pool after a certain time. You get a short time for exclusive distribution as an incentive. If you want perpetual copyright, you can't have used anything provided by society, starting with things like language and music notation. Yeah, Disney, society lets you use those fairy tales, and the motion picture camera, and lots of other stuff. Now give something back.
What you are talking about is called "international remittances" (sending money internationally person-to-person). It's a $500 billion/year activity, and the average fees are 9 percent! This is the killer app for bitcoin at the moment.
Too late, they have: http://noagendaartgenerator.com/sites/default/files/imagecache/fivetwelve/artsubs/113/10-03-2013/BC%20SQ%20copy.jpg
> The problem is; much economic activity is unlikely to happen, if the currency is indeed deflationary
Reality disagrees. First, in the past year the exchange rate for bitcoins has gone up 70 times (extreme deflation), while the number of merchants accepting bitcoin has risen 12 times. Second, if adopted on a mass scale (which it is not, yet), people will still need to pay for shelter, food, and utilities, regardless if it's deflationary or inflationary. Third, bitcoin is currently inflationary, at the rate of 11% a year in theoretical coin production, and higher in reality since "mining" (block generation) is above the theoretical rate.
Those already exist: https://www.casascius.com/
> what elements of contract law are present in bitcoin that would enforce payment if the bitcoins have been tapped out before you got payment?
The same elements of contract law that apply for any other contract. If you make a contract with "unknown user on the internet", it's likely to be unenforceable no matter what currency unit you choose. If you make it with a known person, get their signature, and specify "X Dollars worth of bitcoins at the time of payment", then you are covered like anything else if they breach the contract.
I did that for two years, GPU mining in the background on my regular PC, until it became uneconomic.
> We have no idea what Satoshi's success criteria were
It's clearly stated in his original paper (http://bitcoin.org/bitcoin.pdf):
"What is needed is an electronic payment system based on cryptographic proof instead of trust,
allowing any two willing parties to transact directly with each other without the need for a trusted
third party. Transactions that are computationally impractical to reverse would protect sellers
from fraud, and routine escrow mechanisms could easily be implemented to protect buyers. In
this paper, we propose a solution to the double-spending problem using a peer-to-peer distributed
timestamp server to generate computational proof of the chronological order of transactions. The
system is secure as long as honest nodes collectively control more CPU power than any
cooperating group of attacker nodes."
If the actual Bitcoin network meets the above criteria, it is a success.
> Frankly I'm surprised BitCoin still has value after SilkRoad's demise.
You shouldn't be. The Silk Road indictment reveals their sales represented only 5% of total bitcoin transactions over the period they operated.
There are now at least 24,000 merchants using bitcoin - that's the number using the two largest payment processors, Coinbase and BitPay. You can also buy gift cards for hundreds of major stores with bitcoin through Gyft and eGifter. That's a big channel to spend bitcoins, even if the stores themselves don't take it directly.
Well, bitcoin is designed to prevent irresponsible printing. The coin generation rate is fixed by algorithm.
The Euro and Dollar are the largest world currencies. In the last 10 years the Euro has varied from $1.17 to $1.59, and made that rise in 2.75 years (+11.8%/year) The steepest drop seems to be 4 months from Jul to Nov 2008, when it dropped from $1.59 to $1.25 (-48.5%/year rate).
Admittedly, bitcoin has a long way to go to reach that level of stability, but currencies are not as stable as you think.
http://finance.yahoo.com/echarts?s=EURUSD%3DX+Interactive#symbol=;range=my;compare=;indicator=volume;charttype=area;crosshair=on;ohlcvalues=0;logscale=on;source=undefined;
> "no bank or bitcoin-emitter can be as public-minded as a government,"
On the contrary, banks and governments can ignore the people, when they are too big or powerful. Bitcoin, and businesses that use it, have to compete on service and security else people will move to a better option. You can't ditch your government without a whole lot of effort.
How much land is there on Earth? Are they making more of it? Nope. Seems to be a pretty good investment.
> eventually enough coins will be lost that bitcoins will become useless.
The smallest units in the bitcoin database are called "Satoshi". There are 100 million of them per full bitcoin, thus 2.1 quadrillion Satoshi can be generated. That can withstand a lot of losses, since it is 63 times all the world's currencies combined if converted to dollar value.
If there are not enough bitcoin units, people can adopt any of the 60 other crypto-currencies that already exist. ( https://www.cryptsy.com/ ) It's not like the world isn't already used to multiple currencies.
Only with a DDOS against the mining pools(easy), or the miner's computers (harder)
The Bitcoin network has a combined hash rate of 63,841.77 Petaflops ( http://bitcoinwatch.com/ ). Unless they buy a ton of the same kind of specialized chips as the mining community has, they don't have a chance at matching that rate. The fastest US Supercomputers rate 17 Petaflops (http://top500.org/lists/2013/11/), thus you would need 3,755 of them. I have no doubt the NSA has some supercomputers in the range of the top DOE machines, but not thousands of them.
The next question is why would the NSA *want* to overwhelm bitcoin? The block chain transaction database is publicly shared across the bitcoin network, and lists *every bitcoin transaction ever made*. That is perfect for cross-correlating with the other data the NSA collects, which is the main job the NSA performs these days, looking for "interesting" data matches. Some people even suspect the NSA *created* bitcoin. It uses ingenious crypto/hash math, and who has more mathematicians than they do? Further, the pseudonym of the creator(s) of bitcoin in Japanese is "Nakamoto SAtoshi". Notice the capitalized letters?
> some economists have horrible visceral reactions to Bitcoin because they they have firm stakes in how the status quo works
I think it has more to do with losing their investment of time and money to understand the current system. Bitcoin makes them as dumb as everyone else who is new to it.
The confusion many people make is between the Bitcoin network, which consists of nodes, software, custom hardware, and a big datbase, and "bitcoins" the unit of measure in the database. The network has value because it performs a useful function - delivering payments quickly and cheaply. The demand for using that network in turn gives database entries value for the part they play in delivering payments. But without the rest of the network, the database would be useless.
Thus the data itself doesn't have much value, any more than a random Excel spreadsheet does, in and of itself. If you *use* a spreadsheet as part of a venture capital deal, it now has value through use. Similarly the Bitcoin database (the block chain) only has value so long as it is used. When people stop using it (along with the rest of the network) the value will be zero, like old game software. Since use is rising quickly, so is the value. Since the number of units in the database is growing slower than usage, then the price per unit will also go up.
> What am I missing? How are these being used?
2. BTC actively being used for something so they have actual value.
China now has by far the busiest bitcoin exchange. Since there are very few retail places to spend bitcoins in China, they are likely being used to get around currency controls or taxes. For all we know, corrupt Party officials are using them to get their excess bribes offshore.
Demand from China has skyrocketed. Since there are not many consumer places to spend bitcoins in China yet, the demand is some combination of:
* People using it as a savings vehicle
* Businesses using it to get around currency controls
* Corrupt Party officials and other newly wealthy moving funds out of the country.
If you are referring to Mt.Gox, they aren't the leading exchange any more. BTC China is now the largest, and three others, including Mt.Gox are about even with 20% each. In the US we have Coinbase, who is a "payment processor". They accept bitcoin on behalf of merchants, who get dollars deposited to their account daily. On the other side, Coinbase sells those bitcoins to individuals at market rates. Coinbase isn't an exchange, they sell their coins to you directly. For merchants they remove the currency rate fluctuations and accounting for multiple currencies, since merchants only get dollars, they never touch the bitcoins.
Nope, around 2010 you could buy 1000 BTC for about $50, or $0.05 each. That's only a few years ago.
Yes, obviously. At the moment the buyers are from China, as evidenced by BTC China becoming the largest volume exchange. Since there are hardly any places to spend bitcoins at the consumer level in China yet, the assumption is they are being bought to get around currency controls. So the users would be business or corrupt Party officials.
There are other uses for bitcoin that haven't even ramped up yet. For example, sending money internationally to relatives, an $850 billion market, has an average fee of 9% from places like Western Union. That market is just begging to be undercut by bitcoin. However, it takes time to set up a network of currency exchangers, something Western Union already has. Give it a few years.
> "It is well documented in the bitcoin blockchain that Satoshi Nakamoto famously gave away most of the early bitcoins to encourage adaptation."
Actually, it is easy to prove this is false. Look up any random block number below 25,000, which is in the first 6 months of bitcoin's existence. For example:
https://blockchain.info/block-index/20000 (vary the number 20000 up and down to see other blocks)
Follow the "newly generated coins" transaction (the first one in the block) to the destination address, and notice the coins have never moved. They were not given to anyone.
The Silk Road indictment reveals that their sales only amounted to 4.5% of the total bitcoin transactions over the period it operated. That is about the same ratio as paper US dollars used for drug purchases worldwide vs. total spending of paper dollars for all kinds of purchases.
The indictment also mis-values the total Silk Road sales by taking the total number of bitcoin sales (the only currency they accepted) x the market price at the time they seized the site. Bitcoins were worth much less on average during the previous two years, but prosecutors like to inflate the numbers for publicity and shock value. Dread Pirate Robert's stash is worth a lot *now* for the same reason - the value of the coins he got as commission went up a lot. The commissions *at the time of the sales* was nowhere near as much, and neither was the amount of drug sales in dollar terms.