Not that the military is nice... they just are nicer then Erdogan.
Well I mostly agree to your other points, but not this. You can't herd a nation indefinitely. They need to shoot themselves in the foot and learn in the process. Western nations would not be able to adopt such an authoritative position in these matters if they hadn't screwed up royally in the past. Turkish people who approve censorship should be ashamed of themselves but at the current state they basically lack the wisdom.
Hell, racism was running rampant last time I was there, no one I met felt particularly awkward when others made derogatory remarks about Kurds, and even their extermination. Granted, that may be only a section of the population (mostly western-Turkey Kemalists), but they still are dearly in need of a confrontation with themselves. They lack it completely, *because* of the military herding of the past decades. These people (the old ruling class?) didn't even know that more than half the country didn't share their beliefs, and didn't feel threatened enough to voice bigoted arguments.
What I personally gather from all this, is that the majority population of Turkey currently lack the ability to take actions based on their own views, hence, they don't actually know what their views entail. Yes, it will take a painfully long time for them to figure out, but I think it's inevitable.
They just need support of Western nations, and the everyday excuse. If the US/EU takes one more a step towards censorship, they'll make one more leap. What Turkey wants to censor the most are "terrorist publications", but most of their definitions are vague (they might even have been the model for the 21. century "terror" rhetoric of the US, but they don't have enough political power to enforce their will globally), which is very hard to support externally, so they tend to make their advances using the "children", "copyright" and "security" rhetoric, which are politically more acceptable.
I don't think the model they have in mind is a cut off of Internet, but instead an approval mechanism (they've attempted this more than a decade ago but basically no one cared, the proposed methods were practically impossible). So essentially you will be able to publish information if you have a certificate from a government agency of an ally country. I think it's what any government wants really.
Also, you can't pull these things off without support of the populace, which they have.
Wasn't this maybe a plot of corrupt government people colluding with naked body scanners?
Yup! Let's not focus on vendor profits here. The fear mongering industry includes all kinds of focuses of power (including agencies of the State and terrorist organizations themselves), which all benefit from it in different ways. It's not a new thing, and it's not restricted to a single region nor to terrorism.
As for government corruption, there are almost no negative consequences for an official that installs preventive measures against evildoers, what can you expect? They would still do it even if no single party benefited from it, to legitimize their position.
You're right from the investment perspective, but for me, Bitcoin is a revolution, not an investment. I don't have much money invested in Bitcoin, it's too volatile as a long term investment tool and I'm not a speculator. I invest my money in land. I invest my hopes in Bitcoin.
The money transferred to Wikileaks is minuscule compared to the Bitcoin commerce in general. They stole hundreds of thousands dollars worth of coins, which they will slowly liquidate. It's very likely an honest theft.;-)
If they do destroy it though, it would really be news.
Why would it be illegal? I've never been in the USA, but having heard about it in Bitcoin forums, it shouldn't be. I think by "alternative currencies", you mean currencies that are created to pass as legal tender. Those are more likely frauds. Keep in mind that Euro is also an alternative currency.
Why do you think they didn't do that? 3000 BTC that got stolen was the hot wallet, not the total account. You could however question whether the hot wallet could be thinner. Either way, best way to store money with Bitcoin, whether it's an actual or savings account, is with support for multiple signatures. That way, the thief wouldn't be able to spend money without having the additional signatures, which you keep in other servers.
The problem is, Bitcoin is not untraceable, like digital cash. It is probably the most traceable form of money. Every transaction is public and very available. In ordinary use cases, you don't know who controls what address, so it's almost anonymous, but still certainly traceable. In the case of a robbery, it is better than cash from this aspect because you don't know the robber's identity either way, and with Bitcoin, you know exactly what they did with the money. Though, you don't need guns, bombs and vehicles, so I guess running off with Bitcoins is still a lot easier. From the insurer's perspective however, there are many measures you can put in place to be able to identify the authenticity of the claim when there's a theft.
You can't technically annihilate the Internet altogether, however you can render it completely useless for almost everyone, if you put enough "preventive measures" in place. The current atmosphere allows that, and they seem to have enough scaremongering tactics in reserve to accomplish this. After everything's in place, a "cyber-war" could give them enough pretext to effectively destroy the Internet as we know it. Depending on the regimes of the time, there is a potential that all sides of the war might benefit from this.
Schmidt actually brought up Bitcoin himself. Full quote:
6:36 pm Q: If it comes to real democracy, payment has to be peer-to-peer. Would you like to know about my technology called FairCash?
6:37 pm A: Are you familiar with BitCoin? There are some issues with peer-to-peer money. In most cases it's illegal, besides that it's a great idea. We had our own proposal called Google Bucks, but we didn't want to get into these issues. Most of these systems will have reguatory issues.
Populations might not seem to care. People that have considerable investment power care. In effect it alters the course, even if you won't know how. That's why principles matter.
All the black market activity with Bitcoin combined doesn't even come close to the number of dollars used in black market transactions each year, let alone pesos, yuan, etc. The reason digital cash can be used in black market transactions -- the reason that black market transactions benefit from it -- is that it can be spent and received anonymously.
So, Bitcoin should be spontaneously accepted by the world economy or it is a bad idea? Please.
Also, you dismiss the fact that any centralized systems that provide true anonymity will be immediately shut down. AFAIK Chaum developed an alternative system where a third party could reveal the user's identity in the case of illegal use.
Chaum's result, as far as I know, applied to any digital cash system in which offline transactions are possible, so perhaps Bitcoin trades offline transactions for the ability to be scalable without a central authority.
Yes, blind signatures don't work without central authority. Bitcoin does not provide true anonymity. It provides resilience instead.
offline transactions are important for digital cash (at least in my opinion).
Yes, I agree. That's a disadvantage of Bitcoin.
Though, solutions to the double-spending problem with offline transactions are also cumbersome. Before Bitcoin, on-line transactions meant something else, so technically Bitcoin is a bit different than both cases. You can indeed create offline transactions, and how the networks deal with them are very similar in effect. However, since there is no enforcing agent, even though your payments will be cancelled, there will be no consequences for the double-spender. In Chaum's scheme, your identity will be revealed and you may be punished. So, if there will be off-line payment systems for Bitcoin, they will either be implemented as digital cash apart from the network itself, or will involve signed addresses tied to centralized accounts with consequences attached.
what difference does it make if it was developed in the 90s -- RSA was developed in the 70s and it is still widely used.
I didn't mean that it's bad or anything. It's a very conventional technology that is very reachable. You can use OpenTransactions to create a very advanced system within minutes, if you think it's better money than Bitcoin. However, if the measure is spontaneous adoption, then I guess any new money (by new I mean not depending on/backed by existing systems) is ultimately doomed.
the arguments against it on these grounds are actually similar to the ideas against Esperanto.
Which is even more obscure than Bitcoin despite having been developed and promoted for over a century.
Yes, black markets do benefit from digital cash, regardless of whether the cash is Bitcoin-like or issued by a central authority.
Sorry, I don't get this at all. How would a centralized currency survive if it's heavily utilized for ends that are against the dominant power's policy? Plus, assuming you can do away with it by hiding the issuer from legal powers, then how am I going to trust the issuer without an enforcer? You never replied to this dilemma, which is the reason why distributed trust is not only better, but a necessity. Even if you can't trust anyone, you can trust everyone.
I agree that the focus shall not be the black market. The discussion progressed that way because you claim that scalability issues will get in the way of Bitcoin's success even in the black market case. It could be right (I doubt it though), but that doesn't mean Bitcoin is a bad design, its design is by necessity: inverse commons against tragedy of the anticommons. You can still use regulated money if you think there is a risk of fraud and theft (I don't think it applies to the Bitcoin case, those regulations are for legal businesses, which can be regulated either way, and illegal ones cannot be regulated anyway). The regulations that apply to this context are regulations against entities that function against the dominant power, so it's a matter of political opinion than practical risk/fraud scenarios.
As much as I like the regular internet, I feel safer because there is Freenet. Cases are similar in this context.
you see Bitcoin as a digital cash in Chaum's terms. Technically it isn't.
Then explain the difference, because neither the original Bitcoin paper mentions Chaum's work (or any previous work on digital cash) nor does the Bitcoin Wiki's page on scalability. People keep saying that Chaum's result does not apply to Bitcoin, but nobody seems to be able to say why that is the case.
I already agreed with you that Bitcoin suffers from an analogous problem. On the other hand, Bitcoin only resembles Chaum's digital cash, it's not a derivative of it. It doesn't use blind signatures for starters, which is the foundation of DigiCash. Without blind signatures, DigiCash is just like any other electronic money. So the difference is immense.
Now, I don't want to sound like an expert, so please correct me if I make a mistake. The problem is analogous because both systems require a trail of all transactions. Also, in both cases there is a "change" problem, that practically multiplies the number of coins by two in every cycle. Bitcoin's solution to this is the ability to merge input transactions. So if you need to transfer 10 BTC, and you have 10 different inputs with 1 BTC each, you can combine those inputs to create a transaction with a single output, in effect reducing the number of tokens 10-fold, assuming there is some sort of block chain pruning in place (there is no such system for Bitcoin yet). In most cases you will still need a change address. Although the change address is always a new "token" (I suppose in Chaum's scheme it has to be), in Bitcoin it can be an already existing one, so you can economize there as well, but there is no incentive to do that currently.
Since you've been telling a better cash is possible with Chaum's scheme, I'd like to remind you that it is actually a 90's era thing, and there are already a multitude of such systems in place. I suggest you take a look at the OpenTransactions library, which implements almost everything that is possible in the digital cash tradition, and AFAIK allows inter-issuer-processor networks:
Except that the predefined money supply is a terrible idea for economic reasons.
That's a matter of opinion. It's a dominant opinion, but it's not a consensus among economists. Most economists I know don't object to either idea. Actually, since Bitcoin is not and will never be legal tender, the arguments against it on these grounds are actually similar to the ideas against Esperanto.
Are we still talking about black/gray markets here?
No, because black/grey markets are not the primary reason for deploying digital cash.
Well in that case, I have nothing to argue, I was under the impression that your claim was that Bitcoin would not suffice even in that case. (Quote: "In which case it would only take a digital currency system that does not suffer from Bitcoin's inherent scalability problem").
From the rest of your comment, I get that you see Bitcoin as a digital cash in Chaum's terms. Technically it isn't. On the other hand, the problem is analogous. If you take the analogy further, transaction merging with pruning should have the same effect as token renewal. You can't compact the Bitcoin block chain the same way, because you don't want to. That's by design, but whether it's a bad design, I think, is outside the scope of technical discussion.
One thing Bitcoin is and Chaum's digital cash isn't is that it is a decentralized notary system. So, DigiCash needs regulations, whereas Bitcoin doesn't. No one has authority over your money other than you. You need an outside threat to prevent a centralized authority from running away with your digital cash, whereas you rely on the law of large numbers in the case of Bitcoin. That's the whole reason for the concepts of predefined money supply and proof-of-work.
the biggest advantage of digital cash is that it prevents an untrustworthy merchant from raiding customer accounts (e.g. if a merchant is compromised, credit card data could be used to make unauthorized payments). Anonymity is a secondary goal
Are we still talking about black/gray markets here?
It is not necessary or advantageous for currency units to be created in a decentralized way (like Bitcoin), and it actually presents disadvantages, both technical and economic.
It/is/ a necessity. See: e-gold, Central issuer is a single point of failure. It allows regulators direct access to the economy. Not helpful in the gray market case.
there is no advantage in having such authorities use Bitcoin
There is no disadvantage either. Scalability problems appear gradually. Bitcoin needs to become popular before fees will get high enough to pose a problem. By then, there is incentive to create structure on top of Bitcoin, That is the chicken-and-egg problem I wanted to point at. If it won't become popular, then there won't be a scalability issue. If it does, then there is incentive. We have seen in at work until now, these kind of services popped up quite often, but the economy is too small to call it a conclusive proof.
Token renewal is not hard in a world where Internet access is widely available and should probably be our preferred approach.
I'm somewhat familiar with the paper, I hadn't thought it was directly applicable to the case of Bitcoin (isn't it mostly about Chaum's own scheme?), so I'll have to read it again. Though basically, in Bitcoin's case, keys can be and are merged, so there is the technical foundation to make shrinking possible (isn't token renewal in Chaum's terminology analogous to key merging?). There is some lack of incentive in the current Bitcoin specification though. Transaction pruning is possible, so assuming there can be more incentive to merge keys (I don't know how), you'll get what you want.
Are we still talking about bitponzi.net and similar gambling sites? GP is talking about scams and gives that as an example, so that is the context here. Now, I put a box in front of me that says "thief box" and I tell you that if you put money in that box, it will be mine. Am I a thief now because I'm calling myself a thief?
If you agree with the case, then there is a dilemma in your response. A design that is resilient to regulation is needed in order to have the advantage in the first place, so at least some sort of decentralization is practically a requirement. Maybe it's not a dilemma, but you are suggesting that a better system is possible, I couldn't figure out from your response.
Scalability is a hot topic since the beginning of Bitcoin. I think it will ultimately depend on people's perspective of the currency and the willingness of the society to evolve with the idea. If Bitcoin is valuable enough as a currency, and scalability issues become a problem, the network itself would inevitably become the transaction backbone of a most wider structure, comprising many interlinked central issuing authorities. The bare network would still be open to everyone, but with higher transaction fees. If it's not that valuable, then there wouldn't be a scalibility problem to begin with. This covers enough bases. There are some concerns that the resulting system would be similar to the banking structure we have now, therefore this sort of switch is pointless, but the resemblance is superficial in my opinion.
Third scenario is where we find an ultimate solution to the scalability problem. There are many methods that would make do for the foreseeable future, but there is none that does away with it once and for all. Though, if it all boils down to the renewal of tokens as you mentioned, I think it can still be done with a distributed system. The system itself would need to combine transactions, or else incentivize economization of tokens. Whether that kind of solution can be embedded in existing Bitcoin system is an open question. Granted, what Bitcoin currently does is actually the opposite.
Slashdot Mirror
if you don't, war will follow.
That's what I was advocating, preferably a more 'civil' one. I'd expect to be labeled as evil, rather than naive though.
Not that the military is nice... they just are nicer then Erdogan.
Well I mostly agree to your other points, but not this. You can't herd a nation indefinitely. They need to shoot themselves in the foot and learn in the process. Western nations would not be able to adopt such an authoritative position in these matters if they hadn't screwed up royally in the past. Turkish people who approve censorship should be ashamed of themselves but at the current state they basically lack the wisdom.
Hell, racism was running rampant last time I was there, no one I met felt particularly awkward when others made derogatory remarks about Kurds, and even their extermination. Granted, that may be only a section of the population (mostly western-Turkey Kemalists), but they still are dearly in need of a confrontation with themselves. They lack it completely, *because* of the military herding of the past decades. These people (the old ruling class?) didn't even know that more than half the country didn't share their beliefs, and didn't feel threatened enough to voice bigoted arguments.
What I personally gather from all this, is that the majority population of Turkey currently lack the ability to take actions based on their own views, hence, they don't actually know what their views entail. Yes, it will take a painfully long time for them to figure out, but I think it's inevitable.
They just need support of Western nations, and the everyday excuse. If the US/EU takes one more a step towards censorship, they'll make one more leap. What Turkey wants to censor the most are "terrorist publications", but most of their definitions are vague (they might even have been the model for the 21. century "terror" rhetoric of the US, but they don't have enough political power to enforce their will globally), which is very hard to support externally, so they tend to make their advances using the "children", "copyright" and "security" rhetoric, which are politically more acceptable.
I don't think the model they have in mind is a cut off of Internet, but instead an approval mechanism (they've attempted this more than a decade ago but basically no one cared, the proposed methods were practically impossible). So essentially you will be able to publish information if you have a certificate from a government agency of an ally country. I think it's what any government wants really.
Also, you can't pull these things off without support of the populace, which they have.
Wasn't this maybe a plot of corrupt government people colluding with naked body scanners?
Yup! Let's not focus on vendor profits here. The fear mongering industry includes all kinds of focuses of power (including agencies of the State and terrorist organizations themselves), which all benefit from it in different ways. It's not a new thing, and it's not restricted to a single region nor to terrorism.
As for government corruption, there are almost no negative consequences for an official that installs preventive measures against evildoers, what can you expect? They would still do it even if no single party benefited from it, to legitimize their position.
You're right from the investment perspective, but for me, Bitcoin is a revolution, not an investment. I don't have much money invested in Bitcoin, it's too volatile as a long term investment tool and I'm not a speculator. I invest my money in land. I invest my hopes in Bitcoin.
The money transferred to Wikileaks is minuscule compared to the Bitcoin commerce in general. They stole hundreds of thousands dollars worth of coins, which they will slowly liquidate. It's very likely an honest theft. ;-)
If they do destroy it though, it would really be news.
I doubt that it's legal in the USA anyway.
Why would it be illegal? I've never been in the USA, but having heard about it in Bitcoin forums, it shouldn't be. I think by "alternative currencies", you mean currencies that are created to pass as legal tender. Those are more likely frauds. Keep in mind that Euro is also an alternative currency.
Why do you think they didn't do that? 3000 BTC that got stolen was the hot wallet, not the total account. You could however question whether the hot wallet could be thinner. Either way, best way to store money with Bitcoin, whether it's an actual or savings account, is with support for multiple signatures. That way, the thief wouldn't be able to spend money without having the additional signatures, which you keep in other servers.
The problem is, Bitcoin is not untraceable, like digital cash. It is probably the most traceable form of money. Every transaction is public and very available. In ordinary use cases, you don't know who controls what address, so it's almost anonymous, but still certainly traceable. In the case of a robbery, it is better than cash from this aspect because you don't know the robber's identity either way, and with Bitcoin, you know exactly what they did with the money. Though, you don't need guns, bombs and vehicles, so I guess running off with Bitcoins is still a lot easier. From the insurer's perspective however, there are many measures you can put in place to be able to identify the authenticity of the claim when there's a theft.
Why is that interesting? Your money in the bank is also bits, no?
You can't technically annihilate the Internet altogether, however you can render it completely useless for almost everyone, if you put enough "preventive measures" in place. The current atmosphere allows that, and they seem to have enough scaremongering tactics in reserve to accomplish this. After everything's in place, a "cyber-war" could give them enough pretext to effectively destroy the Internet as we know it. Depending on the regimes of the time, there is a potential that all sides of the war might benefit from this.
Exactly. And who's to say that they won't have a mutual interest in destroying the Internet at one point?
To me, git feels more like minix than linux.
Schmidt actually brought up Bitcoin himself. Full quote:
6:36 pm Q: If it comes to real democracy, payment has to be peer-to-peer. Would you like to know about my technology called FairCash?
6:37 pm A: Are you familiar with BitCoin? There are some issues with peer-to-peer money. In most cases it's illegal, besides that it's a great idea. We had our own proposal called Google Bucks, but we didn't want to get into these issues. Most of these systems will have reguatory
issues.
You clearly misunderstood what I meant by investment, power, principle and not knowing something.
Populations might not seem to care. People that have considerable investment power care. In effect it alters the course, even if you won't know how. That's why principles matter.
Yours is a simplistic world view as well. After you buy the story, sure, what you say makes sense.
Not that I believe them but the article is quite clear:
Some of these documents were stolen from Heartland, at least one is a fake, and some may have been altered.
All the black market activity with Bitcoin combined doesn't even come close to the number of dollars used in black market transactions each year, let alone pesos, yuan, etc. The reason digital cash can be used in black market transactions -- the reason that black market transactions benefit from it -- is that it can be spent and received anonymously.
So, Bitcoin should be spontaneously accepted by the world economy or it is a bad idea? Please.
Also, you dismiss the fact that any centralized systems that provide true anonymity will be immediately shut down. AFAIK Chaum developed an alternative system where a third party could reveal the user's identity in the case of illegal use.
Chaum's result, as far as I know, applied to any digital cash system in which offline transactions are possible, so perhaps Bitcoin trades offline transactions for the ability to be scalable without a central authority.
Yes, blind signatures don't work without central authority. Bitcoin does not provide true anonymity. It provides resilience instead.
offline transactions are important for digital cash (at least in my opinion).
Yes, I agree. That's a disadvantage of Bitcoin.
Though, solutions to the double-spending problem with offline transactions are also cumbersome. Before Bitcoin, on-line transactions meant something else, so technically Bitcoin is a bit different than both cases. You can indeed create offline transactions, and how the networks deal with them are very similar in effect. However, since there is no enforcing agent, even though your payments will be cancelled, there will be no consequences for the double-spender. In Chaum's scheme, your identity will be revealed and you may be punished. So, if there will be off-line payment systems for Bitcoin, they will either be implemented as digital cash apart from the network itself, or will involve signed addresses tied to centralized accounts with consequences attached.
what difference does it make if it was developed in the 90s -- RSA was developed in the 70s and it is still widely used.
I didn't mean that it's bad or anything. It's a very conventional technology that is very reachable. You can use OpenTransactions to create a very advanced system within minutes, if you think it's better money than Bitcoin. However, if the measure is spontaneous adoption, then I guess any new money (by new I mean not depending on/backed by existing systems) is ultimately doomed.
the arguments against it on these grounds are actually similar to the ideas against Esperanto.
Which is even more obscure than Bitcoin despite having been developed and promoted for over a century.
What can I say, you're right. :-)
Yes, black markets do benefit from digital cash, regardless of whether the cash is Bitcoin-like or issued by a central authority.
Sorry, I don't get this at all. How would a centralized currency survive if it's heavily utilized for ends that are against the dominant power's policy? Plus, assuming you can do away with it by hiding the issuer from legal powers, then how am I going to trust the issuer without an enforcer? You never replied to this dilemma, which is the reason why distributed trust is not only better, but a necessity. Even if you can't trust anyone, you can trust everyone.
I agree that the focus shall not be the black market. The discussion progressed that way because you claim that scalability issues will get in the way of Bitcoin's success even in the black market case. It could be right (I doubt it though), but that doesn't mean Bitcoin is a bad design, its design is by necessity: inverse commons against tragedy of the anticommons. You can still use regulated money if you think there is a risk of fraud and theft (I don't think it applies to the Bitcoin case, those regulations are for legal businesses, which can be regulated either way, and illegal ones cannot be regulated anyway). The regulations that apply to this context are regulations against entities that function against the dominant power, so it's a matter of political opinion than practical risk/fraud scenarios.
As much as I like the regular internet, I feel safer because there is Freenet. Cases are similar in this context.
you see Bitcoin as a digital cash in Chaum's terms. Technically it isn't.
Then explain the difference, because neither the original Bitcoin paper mentions Chaum's work (or any previous work on digital cash) nor does the Bitcoin Wiki's page on scalability. People keep saying that Chaum's result does not apply to Bitcoin, but nobody seems to be able to say why that is the case.
I already agreed with you that Bitcoin suffers from an analogous problem. On the other hand, Bitcoin only resembles Chaum's digital cash, it's not a derivative of it. It doesn't use blind signatures for starters, which is the foundation of DigiCash. Without blind signatures, DigiCash is just like any other electronic money. So the difference is immense.
Now, I don't want to sound like an expert, so please correct me if I make a mistake. The problem is analogous because both systems require a trail of all transactions. Also, in both cases there is a "change" problem, that practically multiplies the number of coins by two in every cycle. Bitcoin's solution to this is the ability to merge input transactions. So if you need to transfer 10 BTC, and you have 10 different inputs with 1 BTC each, you can combine those inputs to create a transaction with a single output, in effect reducing the number of tokens 10-fold, assuming there is some sort of block chain pruning in place (there is no such system for Bitcoin yet). In most cases you will still need a change address. Although the change address is always a new "token" (I suppose in Chaum's scheme it has to be), in Bitcoin it can be an already existing one, so you can economize there as well, but there is no incentive to do that currently.
Since you've been telling a better cash is possible with Chaum's scheme, I'd like to remind you that it is actually a 90's era thing, and there are already a multitude of such systems in place. I suggest you take a look at the OpenTransactions library, which implements almost everything that is possible in the digital cash tradition, and AFAIK allows inter-issuer-processor networks:
https://github.com/FellowTraveler/Open-Transactions/wiki
Except that the predefined money supply is a terrible idea for economic reasons.
That's a matter of opinion. It's a dominant opinion, but it's not a consensus among economists. Most economists I know don't object to either idea. Actually, since Bitcoin is not and will never be legal tender, the arguments against it on these grounds are actually similar to the ideas against Esperanto.
Are we still talking about black/gray markets here?
No, because black/grey markets are not the primary reason for deploying digital cash.
Well in that case, I have nothing to argue, I was under the impression that your claim was that Bitcoin would not suffice even in that case. (Quote: "In which case it would only take a digital currency system that does not suffer from Bitcoin's inherent scalability problem").
From the rest of your comment, I get that you see Bitcoin as a digital cash in Chaum's terms. Technically it isn't. On the other hand, the problem is analogous. If you take the analogy further, transaction merging with pruning should have the same effect as token renewal. You can't compact the Bitcoin block chain the same way, because you don't want to. That's by design, but whether it's a bad design, I think, is outside the scope of technical discussion.
One thing Bitcoin is and Chaum's digital cash isn't is that it is a decentralized notary system. So, DigiCash needs regulations, whereas Bitcoin doesn't. No one has authority over your money other than you. You need an outside threat to prevent a centralized authority from running away with your digital cash, whereas you rely on the law of large numbers in the case of Bitcoin. That's the whole reason for the concepts of predefined money supply and proof-of-work.
the biggest advantage of digital cash is that it prevents an untrustworthy merchant from raiding customer accounts (e.g. if a merchant is compromised, credit card data could be used to make unauthorized payments). Anonymity is a secondary goal
Are we still talking about black/gray markets here?
It is not necessary or advantageous for currency units to be created in a decentralized way (like Bitcoin), and it actually presents disadvantages, both technical and economic.
It /is/ a necessity. See: e-gold, Central issuer is a single point of failure. It allows regulators direct access to the economy. Not helpful in the gray market case.
there is no advantage in having such authorities use Bitcoin
There is no disadvantage either. Scalability problems appear gradually. Bitcoin needs to become popular before fees will get high enough to pose a problem. By then, there is incentive to create structure on top of Bitcoin, That is the chicken-and-egg problem I wanted to point at. If it won't become popular, then there won't be a scalability issue. If it does, then there is incentive. We have seen in at work until now, these kind of services popped up quite often, but the economy is too small to call it a conclusive proof.
Token renewal is not hard in a world where Internet access is widely available and should probably be our preferred approach.
I'm somewhat familiar with the paper, I hadn't thought it was directly applicable to the case of Bitcoin (isn't it mostly about Chaum's own scheme?), so I'll have to read it again. Though basically, in Bitcoin's case, keys can be and are merged, so there is the technical foundation to make shrinking possible (isn't token renewal in Chaum's terminology analogous to key merging?). There is some lack of incentive in the current Bitcoin specification though. Transaction pruning is possible, so assuming there can be more incentive to merge keys (I don't know how), you'll get what you want.
Are we still talking about bitponzi.net and similar gambling sites? GP is talking about scams and gives that as an example, so that is the context here. Now, I put a box in front of me that says "thief box" and I tell you that if you put money in that box, it will be mine. Am I a thief now because I'm calling myself a thief?
Yeah. Bitcoin is just like cash, but works long distance. And you can even store it in your mind. It's what I've always dreamed of.
If you agree with the case, then there is a dilemma in your response. A design that is resilient to regulation is needed in order to have the advantage in the first place, so at least some sort of decentralization is practically a requirement. Maybe it's not a dilemma, but you are suggesting that a better system is possible, I couldn't figure out from your response.
Scalability is a hot topic since the beginning of Bitcoin. I think it will ultimately depend on people's perspective of the currency and the willingness of the society to evolve with the idea. If Bitcoin is valuable enough as a currency, and scalability issues become a problem, the network itself would inevitably become the transaction backbone of a most wider structure, comprising many interlinked central issuing authorities. The bare network would still be open to everyone, but with higher transaction fees. If it's not that valuable, then there wouldn't be a scalibility problem to begin with. This covers enough bases. There are some concerns that the resulting system would be similar to the banking structure we have now, therefore this sort of switch is pointless, but the resemblance is superficial in my opinion.
Third scenario is where we find an ultimate solution to the scalability problem. There are many methods that would make do for the foreseeable future, but there is none that does away with it once and for all. Though, if it all boils down to the renewal of tokens as you mentioned, I think it can still be done with a distributed system. The system itself would need to combine transactions, or else incentivize economization of tokens. Whether that kind of solution can be embedded in existing Bitcoin system is an open question. Granted, what Bitcoin currently does is actually the opposite.