The law (as in common law) has been created and refined by courts over millennia to compensate for and (indirectly) prevent harm. Legislatures twist the law and abuse the respect people hold for it to control the populace.
The average American high-school graduate knows approximately 45,000 words (1) nearly ten times the number you cited.
Sure, but what are the odds of most of those being picked? The standard word-lists for systems like yours are only about 2000 words long, and for a good reason. You have to eliminate minor variations, sound-alikes, and long words with complicated spellings or you run into problems with people not being able to remember the exact variation they used in their passphrase. And if you let people pick their own words you'll be lucky to get beyond the top 1000 with any regularity.
For the embarrassing stuff, complete anonymity doesn't help you hiding stuff from your wife, because she still sees money disappearing from bank accounts and you have to explain that.
Did you happen to consider that you might not by trying to hide your payments from your wife, but rather someone else who isn't in a position to expect a full accounting of your finances? Your boss, a coworker, the press, that busybody neighbor... perhaps even a friend or family member you're trying to surprise with a gift.
People have a reasonable expectation of financial privacy, which means mixing services and related protocols have a perfectly legitimate part to play in the Bitcoin ecosystem.
The Silk Road was running in Tor as well and it got taken down. It just depends how high profile the service is and how badly the cops want to shut it down - a cost benefit thing.
It depends more on how competent the site operators are. Silk Road wasn't taken down because they traced the site through Tor, it was taken down because the operator made mistakes you wouldn't expect even a rookie to make, like using the same pseudonym on Silk Road as on public forums linked with his real name, and having boxes full of fake IDs shipped to his residence. Under the circumstances, I'd say it's a minor miracle it stayed in operation as long as it did.
That isn't to say that Tor onion sites are immune to traffic analysis or similar methods of identifying where they operate from. However, in the NSA's own (leaked) documents they stated that while they had some luck mapping the network with traffic analysis, they'd never managed to uncover a specific Tor onion site on demand. And if you do it right, they'll only find the server—not its administrator.
Three words probably isn't enough. Optimistically assuming that you picked your three words from a 4096-word dictionary with a uniform probability distribution, that's only 36 bits of randomness, the equivalent of a 6-character case-sensitive alphanumeric password (without symbols). To equal a 8-character password with symbols (about 49 bits) you'd need at least four words, assuming the same 4096-word dictionary and uniformly random selection. To avoid similar-sounding and hard-to-remember words, a 2048-word list is more reasonable, in which case you'd need at least five words.
It's a good idea, though. Random words are generally a bit easier to remember and can be made secure, provided you don't let the user pick them. Unfortunately, many systems are not passphrase-friendly, with arbitrary limits on the length and content of the password field.
why don't you just say the battery holds 100k amps?
Probably because that would be even more confusing.:-) The capacity of the battery is a measure of energy. Watts are a unit of power (energy divided by time). Amps are a measure of current (power divided by voltage). Batteries are frequently rated in amp-hours, but that's more or less useless unless you already know the battery's voltage. What you care about is the stored energy, typically measured in either joules or watt-hours (with 1 Wh = 3600 J). For some applications you may also care about the maximum power (watts) or current (amps) the battery can source, which depends on the voltage and internal resistance.
and a law that says you can't murder people? who am I to tell someone else whether he can or cannot murder?
No special law is needed to say that you can't murder people. You can do anything you want with your own property. When you want to do something which involves other people's property (including their bodies), you need their permission. That's really the only law we need; everything else follows. (The formal version is known as the Non-Aggression Principle.)
More fundamentally, any reasoning which would let you murder someone without penalty can be applied equally well to yourself—which is equivalent to having the death penalty for murder.
As soon as we decided that hospitals were legally required to give you health care if you walked into the emergency room we decided that health care is a human right.
That isn't how it works. Hospitals are only required to provide just enough emergency medical care to stabilize you. They aren't allowed to refuse that much, even if you don't have medical insurance or other proof of your ability to pay. That doesn't mean you get the care for free, however: you will still be billed for it, and (IIRC) medical bills are one of the harder items to discharge in bankruptcy. The hospital may never get back the full cost of that emergency care, but they are free to try.
The actual cost of the portion of required emergency care which isn't actually paid back is small enough to be considered irrelevant.
As I see it, there are two major problems with the no-insurance penalty. First, the ACA's proponents claimed that the penalty was a fine, not a tax, right up until the Supreme Court said that it was only constitutional in the form of a tax. Meaning that the ACA was passed under false pretenses. Second, coupling revenue with policy undermines equality under the law. What's the difference, really, between taxing everyone 100% of their income, with a 70% rebate for those who "voluntarily" limit their speech to approved topics, and simply fining you 70% of your income for speaking on unapproved topics, leaving you with nothing? Apparently the constitutionality of any action depends on whether the government pursues it through the courts, where the Constitution occasionally applies, or through the IRS, where there are no limits. That is simply unacceptable for any constitutional democracy.
An income tax should be just that: a tax on income. It shouldn't vary from one bit of income to another depending on how much total income you have or how much you conform to the wishes of those in power. $X in income should always equal $Y in taxes. If you want a so-called "progressive" tax, implement a rebate system—but not through the IRS. The IRS's job should be simple and straightforward, without a bunch of loopholes and exceptions and tax breaks and special rates depending on how much you happened to make that year.
My idea of a proper income (more accurately profit) tax form:
Line 1: Gross income (market price of all goods and services received)
Line 2: Gross expenditures (market price of all goods sold / expenses payed)
Line 3: Profit = Line 2 - Line 1
Line 4: Tax = x% of Line 3 if positive, else zero
If you buy or sell a good at the market price, the additions to Line 1 and Line 2 cancel each other out. Line 3 is thus only affected by (a) selling services (which would include income from labor), and (b) buying or selling goods at a price other than the market price.
"Market price" is ill-defined, but if you insist on having any sort of income tax, I think it's more or less inevitable that you will need to somehow convert the value of non-cash goods into a common currency, even though the concept makes no sense economically. (Prices only exists for specific goods at the times they're sold; anything else is merely a subjective estimate.) Note that this makes no distinction between "business" and "personal" expenses, which was always a rather arbitrary dividing line anyway.
The block chain shows those original coins have never been moved. So unless they tossed away the wallet file, their balance is worth nearly a billion dollars.
The odds are fairly good that the wallet files were lost. There's no way to know for sure until and unless someone spends them, but keep in mind that while those bitcoins may be worth a billion dollars today, at the time they were only small change. This was even earlier than the time one lucky user spent 10000 BTC on a pizza, which at the time was a reasonable exchange. For that matter, they probably predate the earliest exchange services. Bitcoin was an interesting experiment at most, and the developers were running even more experimental software than other users, with a correspondingly higher chance of something going wrong and corrupting a wallet file. Even ignoring random corruption, it's entirely possible that some developers simply deleted or overwrote wallet files in the course of testing new generations of the software.
If no other people were alive except yourself, you would still be governed by the laws of nature.
I think you know perfectly well that this is not what anyone has ever meant by the term "government". The word refers to an institution where humans govern other humans. In other words, the state.
If it makes you happier, you can pretend that I said "state". So far as I'm concerned, there is no distinction. I am not concerned with so-called "governments" which do not claim legitimacy in the use of aggressive force, and are consequently indistinguishable from private, non-governmental organizations.
Everybody imagines a perfect world governed by himself.
Speak for yourself. Personally, I envision an (inevitably) imperfect, but free, world governed by no one. Because, as you say, once you've decided in favor of government there's nothing to say that you'll get the government you want. Others can govern you just as readily as you can govern them.
Driving is not a privilege, but a right, to libertarians - as long as you do it on your own property. Driving on somebody elses property is not a right; you'll have to get permission and abide by the rules set by that somebody else, or just [don't?] drive there.
Yes, and that's all well and good, but who owns the public roads and set the rules? The government ordered them built, but it paid for the construction with money stolen from others. There's no way it can be considered the legitimate owner. Who does that leave?
I wonder how good this logic would look to people if it were applied to entire cities, states, or even the whole country. "You chose to remain in $location, so you consented to having your constitutional rights violated!"
Unfortunately, people apply that logic all the time, even for whole countries. "If you don't like it, leave!"
If you chose to live in a place someone else legitimately owns then I would buy the argument that you consented to any rules set by the property owner, with noncompliance being equivalent to trespass. That doesn't apply to simply remaining in the area you were born in, however, and governments are not generally legitimate property owners. Even when they purchase property rather than simply claiming it, the purchase is carried out with stolen funds. A municipal government could perhaps be seen as the near-equivalent of a private co-op in most respects, but anything larger... not a chance.
The whole point of insurance is that costs are shared among people with equal risks OVER TIME.
No, the point of insurance is to trade risk for cost in a deal between the insurer and the insured. The existence of risk pools makes this practical on a large scale, since the costs average out, but it's not really a necessary component. You can be insured for a potential one-off event that no one else will ever experience.
The correct way for insurance to operate is that you pay a higher premium while your risk is high, and a lower premium while your risk is low. Averaging out the high-risk and low-risk times is not the function of insurance.
An "efficiency" in an insurance product is usually an absurdity. The ideally "efficient" insurance product is no insurance at all!
Nonsense. You're assuming perfect knowledge of the future. Insurance operates in the real world, where the future is uncertain. If you actually knew what the outcome would be then you wouldn't need insurance, but all you actually know is how likely each outcome is projected to be. Efficient insurance means not paying more than you have to in premiums for coverage against a particular outcome. Since underestimating the risk means the insurance company eventually goes out of business, and overestimating it means you pay too much in premiums, the efficient price is the one where the risk is accurately assessed and there is sufficient competition to keep the insurance company's margins in check.
To achieve its ultimate goal and replace all other currencies, the price would have to be about $3,000,000/BTC in today's dollars, based on the world GDP and the 21 million BTC limit.
In retrospect, it doesn't make sense to simply divide the global GDP by the number of currency units, since that ignores the velocity of money, clearing, etc. For a more apples-to-apples comparison, the sum of the USD and Euro M2 figures (after converting euros to dollars) is about $22 trillion. This represents all the dollars and euros presently in circulation. To replace just dollars and euros, ignoring the rest of the world for the moment, would require a price above $1 million per bitcoin. That's the wildly-optimistic view, of course; even if Bitcoin is successful, which remains a big "if", it may not fully replace conventional currencies.
I'd suggest you reword this statement for internal consistency. As commodities can also be investments.
Fine. Bitcoin is not an investment operation. It's as much or as little an investment as you want it to be, like anything else, but that's hardly relevant here.
Again, nowhere does it state that the promise of a return comes from Bitcoin itself. This is not required to classify as a Ponzi scheme.
It's required if you want to call Bitcoin a Ponzi scheme. Otherwise you only have a Ponzi scheme which happens to involve bitcoins, much like many other Ponzi schemes involve the U.S. dollar.
There's groups of people, each hoping that the next person in is an even bigger sucker than they are.
While I'm sure such groups exist, that isn't sufficient to make Bitcoin a Ponzi scheme.
Which is more or less what's happening here.
No, it isn't, because no one is making promises of high returns—the most important part, which you seem to have conveniently skipped over. Bitcoin may well be in the middle of a bubble at the moment, though just how much of a bubble and where the price will end up are open questions. That doesn't make it a Ponzi scheme.
If you find someone who is promising that buying Bitcoins will provide you with high returns at low risk, then I would agree that that person is running a Ponzi scheme. It would be their Ponzi scheme, however, not Bitcoin's. Calling Bitcoin a Ponzi scheme is as misguided as calling gold, or oil, or tech stocks Ponzi schemes—they've all experienced similar bubbles in recent history.
For that matter, even calling the Bitcoin market a bubble doesn't really characterize the situation. It's a new thing, with a lot of potential, but also a lot of enemies and technical, social, and legal hurdles to overcome. No one really knows what to make of it. If it fails, the current price is obviously way too high. If it succeeds, however, then it's hard to argue that the current price is anywhere near high enough. To achieve its ultimate goal and replace all other currencies, the price would have to be about $3,000,000/BTC in today's dollars, based on the world GDP and the 21 million BTC limit. Thus the large price swings—they reflect the underlying uncertainty about Bitcoin's future. It's not really a bubble because you can't really argue that it's being priced above its rational worth. It all depends on how you expect this experiment to turn out.
The trouble with ignoring them; is, if the BTC are ignored, then they can be used as a vehicle to avoid or delay tax liabilities and information return reporting that would otherwise occur.
I don't dispute that, but how would it differ from capital gains, or for that matter income from marketing or other expenditures made with the intent of indirectly increasing future income? These also have the effect of delaying tax liability, and there is no reporting on their present value, only on the realized gains. (At least for individuals; it may be different for businesses.)
If bitcoins end up being classified as assets for tax purposes, individuals would still only report them as capital gains when they sell them or trade them for other goods or services.
A Ponzi scheme is a fraudulent investment operation that pays returns to its investors from their own money or the money paid by subsequent investors, rather than from profit earned by the individual or organization running the operation.
That's the definition of a ponzi scheme and the current way cash equivalency for BTC is attained.
Tell me I'm wrong.
You're wrong. Bitcoin is not a Ponzi scheme.
1) Bitcoin is not an investment. You're not paying for a stake in an operation, you're buying a commodity.
2) Consistent with the first point, Bitcoin doesn't promise or pay returns. You don't get anything "from Bitcoin". You may be able to sell your bitcoins later for a higher (or lower) price than you paid, but there are no guarantees.
3) There is no individual or organization "running" Bitcoin. That's the whole point—it's decentralized, with no one in charge. There is no one to run your hypothetical Ponzi scheme.
The primary identifying factor of a Ponzi scheme is promises of high returns for little risk, with actual returns being paid out of investor's own funds. Bitcoin cannot qualify because no one qualified to speak for Bitcoin (and there really isn't anyone qualified to speak for Bitcoin) has made any such promises.
Don't take my word for it, however. The SEC has its own document describing Ponzi Schemes Using Virtual Currencies. Note carefully that while they discuss some Ponzi schemes that involved Bitcoin, they never try to claim that Bitcoin itself is a Ponzi scheme.
So far two people have responded saying that Bitcoin clearly falls under a particular section of tax law. However, you've argued—reasonably in both cases—for different sections, commodities and cash-equivalents. I think this illustrates the GP's point quite well.
Personally, I think you're both wrong. If you look into what Bitcoin really is, it's really closer to reputation than a commodity. What you really have, when all is said and done, is the agreement of other Bitcoin users that the person in possession of a particular private key controls a particular number of bitcoins. There are no actual bitcoins (not even as data), it's just a unit of account, like points in a game. Now, these "points" happen to be worth something, but only so long as everyone else plays along.
From a tax point of view, just as it would be unreasonable to tax someone on the value of their reputation, it would be unreasonable to tax them on the present value of their bitcoins. It makes much more sense to ignore bitcoins per se and treat their sale or exchange for other goods or services as regular income, with deductions for bitcoin-related expenses.
Only if you want to be able to bootstrap a fully validating node from scratch. However, there is no particular reason why you couldn't bootstrap a fully-validating node from a checkpoint of another fully-validating node (plus the blocks since the checkpoint), rather than replaying all the blocks in the blockchain dating back to the genesis block. You'd have to trust the checkpoint, of course, and all data on previously spent transactions would be lost.
To guarantee anonymity regarding past transactions, however, you'd need to be sure no one has a full copy of the blockchain, which is impossible. Anyone with sufficient dedication could preserve all the data for posterity. Pruning is a solution to the disk space and CPU requirements associated with saving and validating the full blockchain, nothing more.
What processor takes more than 1 cycle to test a value other than 0? Educate me, please.
You can often do away with the extra test altogether when you're comparing against zero, provided the decrement operation sets the condition bits. It's also fairly common to have dedicated counters and "decrement and branch if not zero" opcodes. If you're comparing against a non-zero constant, and the compiler doesn't optimize the comparison away, that's at least one extra instruction and one extra cycle in the body of the loop. In optimized code the space required for the extra opcode can be just as important as the time to perform the extra arithmetic.
BitCoin is not like this. A bitcoin is a unique value and as it is passed from one wallet to another, that transaction is logged throughout the network. For any given bitcoin, you can trace the path of THAT SPECIFIC COIN from the time it was created to where it was today - seeing all of the wallets it passed through and what IP address owned that wallet at the time.
Bitcoins are not unique values. They're abstract concepts. The blockchain doesn't track ownership of specific bitcoins; it's more like a ledger, tracking how many bitcoins each address controls. The blockchain also doesn't track IP addresses; some of the monitoring sites report an address, but that isn't guaranteed to be the real address of the wallet. It's just the IP address observed when the transaction was first relayed, and very easy to spoof even without using a protocol like Tor to hide the source.
On top of that, a properly implemented mixing service makes it impossible to associate particular inputs and outputs. As a trivial example, consider a transaction with 1000 inputs of 1 BTC each and 1000 matching 1 BTC outputs. Let's say you know that five of the input transactions can be traced to a sale of stolen property. There is no way to know which five of the outputs are controlled by the same person or organization. It could be any of them—or even none of them, if the mixing pool retains a balance.
Those two dollars have different serial numbers.... in the eyes of the government, the law, and everyone under the sun, all individual dollars are the same and interchangeable - my dollar is as good as your dollar.
First you say that every dollar has a unique serial number, and then you turn around and say that all dollars are interchangeable. Which is it? It's only convention which says that dollars aren't treated like other stolen property when you are found holding one with a serial number known to have been used in a crime. If anything, bitcoins are even more fungible than dollar bills. They don't have unique serial numbers. Many transactions draw from multiple inputs and most send to multiple outputs (the destination and a unique change address), which means that a certain amount of mixing is built in to the protocol. After a couple of normal transactions the most you could say about any particular output is that a certain fraction of the inputs, several generations removed, were known to be tainted.
You buy $1000 worth at $1, do you get out when they hit $5? $25? $100?
Here's a simple suggestion: every time the price doubles, sell 33%. I would say that is a reasonable balance between long-term potential and realizing your gains while the realizing's good. (No guarantees about this being the best strategy, though.)
In this example, after the price reached $64/BTC you would be left with about 87.8 BTC (worth $5,619) and $9,237. That's a lot less than $64,000, of course, but it's also a lot more than what you started with, both in BTC and in USD, and you're not exposed to nearly as much risk along the way.
The chore of figuring out how and where to put it on my tax form is not worth $133.
Really? It's no different than trading stocks, collectables, or other commodities. If all else fails, just write it down as miscellaneous income. You might be able to report it as capital gains if you kept track of the cost basis. If you've ever held a yard sale or sold something on eBay you've gone through the process before.
Except a Tier1 ISP router edge firewall rule to block TCP port 8333.
*POOF* all bitcoin transactions in USA go to ZERO, and price soon follows.
A workaround would be published within the hour. The protocol doesn't rely on any particular port. For that matter, you can already join the network via I2P or Tor.
Slashdot Mirror
The law (as in common law) has been created and refined by courts over millennia to compensate for and (indirectly) prevent harm. Legislatures twist the law and abuse the respect people hold for it to control the populace.
The average American high-school graduate knows approximately 45,000 words (1) nearly ten times the number you cited.
Sure, but what are the odds of most of those being picked? The standard word-lists for systems like yours are only about 2000 words long, and for a good reason. You have to eliminate minor variations, sound-alikes, and long words with complicated spellings or you run into problems with people not being able to remember the exact variation they used in their passphrase. And if you let people pick their own words you'll be lucky to get beyond the top 1000 with any regularity.
For the embarrassing stuff, complete anonymity doesn't help you hiding stuff from your wife, because she still sees money disappearing from bank accounts and you have to explain that.
Did you happen to consider that you might not by trying to hide your payments from your wife, but rather someone else who isn't in a position to expect a full accounting of your finances? Your boss, a coworker, the press, that busybody neighbor... perhaps even a friend or family member you're trying to surprise with a gift.
People have a reasonable expectation of financial privacy, which means mixing services and related protocols have a perfectly legitimate part to play in the Bitcoin ecosystem.
The Silk Road was running in Tor as well and it got taken down. It just depends how high profile the service is and how badly the cops want to shut it down - a cost benefit thing.
It depends more on how competent the site operators are. Silk Road wasn't taken down because they traced the site through Tor, it was taken down because the operator made mistakes you wouldn't expect even a rookie to make, like using the same pseudonym on Silk Road as on public forums linked with his real name, and having boxes full of fake IDs shipped to his residence. Under the circumstances, I'd say it's a minor miracle it stayed in operation as long as it did.
That isn't to say that Tor onion sites are immune to traffic analysis or similar methods of identifying where they operate from. However, in the NSA's own (leaked) documents they stated that while they had some luck mapping the network with traffic analysis, they'd never managed to uncover a specific Tor onion site on demand. And if you do it right, they'll only find the server—not its administrator.
Three words probably isn't enough. Optimistically assuming that you picked your three words from a 4096-word dictionary with a uniform probability distribution, that's only 36 bits of randomness, the equivalent of a 6-character case-sensitive alphanumeric password (without symbols). To equal a 8-character password with symbols (about 49 bits) you'd need at least four words, assuming the same 4096-word dictionary and uniformly random selection. To avoid similar-sounding and hard-to-remember words, a 2048-word list is more reasonable, in which case you'd need at least five words.
It's a good idea, though. Random words are generally a bit easier to remember and can be made secure, provided you don't let the user pick them. Unfortunately, many systems are not passphrase-friendly, with arbitrary limits on the length and content of the password field.
why don't you just say the battery holds 100k amps?
Probably because that would be even more confusing. :-) The capacity of the battery is a measure of energy. Watts are a unit of power (energy divided by time). Amps are a measure of current (power divided by voltage). Batteries are frequently rated in amp-hours, but that's more or less useless unless you already know the battery's voltage. What you care about is the stored energy, typically measured in either joules or watt-hours (with 1 Wh = 3600 J). For some applications you may also care about the maximum power (watts) or current (amps) the battery can source, which depends on the voltage and internal resistance.
and a law that says you can't murder people? who am I to tell someone else whether he can or cannot murder?
No special law is needed to say that you can't murder people. You can do anything you want with your own property. When you want to do something which involves other people's property (including their bodies), you need their permission. That's really the only law we need; everything else follows. (The formal version is known as the Non-Aggression Principle.)
More fundamentally, any reasoning which would let you murder someone without penalty can be applied equally well to yourself—which is equivalent to having the death penalty for murder.
As soon as we decided that hospitals were legally required to give you health care if you walked into the emergency room we decided that health care is a human right.
That isn't how it works. Hospitals are only required to provide just enough emergency medical care to stabilize you. They aren't allowed to refuse that much, even if you don't have medical insurance or other proof of your ability to pay. That doesn't mean you get the care for free, however: you will still be billed for it, and (IIRC) medical bills are one of the harder items to discharge in bankruptcy. The hospital may never get back the full cost of that emergency care, but they are free to try.
The actual cost of the portion of required emergency care which isn't actually paid back is small enough to be considered irrelevant.
As I see it, there are two major problems with the no-insurance penalty. First, the ACA's proponents claimed that the penalty was a fine, not a tax, right up until the Supreme Court said that it was only constitutional in the form of a tax. Meaning that the ACA was passed under false pretenses. Second, coupling revenue with policy undermines equality under the law. What's the difference, really, between taxing everyone 100% of their income, with a 70% rebate for those who "voluntarily" limit their speech to approved topics, and simply fining you 70% of your income for speaking on unapproved topics, leaving you with nothing? Apparently the constitutionality of any action depends on whether the government pursues it through the courts, where the Constitution occasionally applies, or through the IRS, where there are no limits. That is simply unacceptable for any constitutional democracy.
An income tax should be just that: a tax on income. It shouldn't vary from one bit of income to another depending on how much total income you have or how much you conform to the wishes of those in power. $X in income should always equal $Y in taxes. If you want a so-called "progressive" tax, implement a rebate system—but not through the IRS. The IRS's job should be simple and straightforward, without a bunch of loopholes and exceptions and tax breaks and special rates depending on how much you happened to make that year.
My idea of a proper income (more accurately profit) tax form:
If you buy or sell a good at the market price, the additions to Line 1 and Line 2 cancel each other out. Line 3 is thus only affected by (a) selling services (which would include income from labor), and (b) buying or selling goods at a price other than the market price.
"Market price" is ill-defined, but if you insist on having any sort of income tax, I think it's more or less inevitable that you will need to somehow convert the value of non-cash goods into a common currency, even though the concept makes no sense economically. (Prices only exists for specific goods at the times they're sold; anything else is merely a subjective estimate.) Note that this makes no distinction between "business" and "personal" expenses, which was always a rather arbitrary dividing line anyway.
The block chain shows those original coins have never been moved. So unless they tossed away the wallet file, their balance is worth nearly a billion dollars.
The odds are fairly good that the wallet files were lost. There's no way to know for sure until and unless someone spends them, but keep in mind that while those bitcoins may be worth a billion dollars today, at the time they were only small change. This was even earlier than the time one lucky user spent 10000 BTC on a pizza, which at the time was a reasonable exchange. For that matter, they probably predate the earliest exchange services. Bitcoin was an interesting experiment at most, and the developers were running even more experimental software than other users, with a correspondingly higher chance of something going wrong and corrupting a wallet file. Even ignoring random corruption, it's entirely possible that some developers simply deleted or overwrote wallet files in the course of testing new generations of the software.
If no other people were alive except yourself, you would still be governed by the laws of nature.
I think you know perfectly well that this is not what anyone has ever meant by the term "government". The word refers to an institution where humans govern other humans. In other words, the state.
If it makes you happier, you can pretend that I said "state". So far as I'm concerned, there is no distinction. I am not concerned with so-called "governments" which do not claim legitimacy in the use of aggressive force, and are consequently indistinguishable from private, non-governmental organizations.
Everybody imagines a perfect world governed by himself.
Speak for yourself. Personally, I envision an (inevitably) imperfect, but free, world governed by no one. Because, as you say, once you've decided in favor of government there's nothing to say that you'll get the government you want. Others can govern you just as readily as you can govern them.
Driving is not a privilege, but a right, to libertarians - as long as you do it on your own property. Driving on somebody elses property is not a right; you'll have to get permission and abide by the rules set by that somebody else, or just [don't?] drive there.
Yes, and that's all well and good, but who owns the public roads and set the rules? The government ordered them built, but it paid for the construction with money stolen from others. There's no way it can be considered the legitimate owner. Who does that leave?
I wonder how good this logic would look to people if it were applied to entire cities, states, or even the whole country. "You chose to remain in $location, so you consented to having your constitutional rights violated!"
Unfortunately, people apply that logic all the time, even for whole countries. "If you don't like it, leave!"
If you chose to live in a place someone else legitimately owns then I would buy the argument that you consented to any rules set by the property owner, with noncompliance being equivalent to trespass. That doesn't apply to simply remaining in the area you were born in, however, and governments are not generally legitimate property owners. Even when they purchase property rather than simply claiming it, the purchase is carried out with stolen funds. A municipal government could perhaps be seen as the near-equivalent of a private co-op in most respects, but anything larger... not a chance.
The whole point of insurance is that costs are shared among people with equal risks OVER TIME.
No, the point of insurance is to trade risk for cost in a deal between the insurer and the insured. The existence of risk pools makes this practical on a large scale, since the costs average out, but it's not really a necessary component. You can be insured for a potential one-off event that no one else will ever experience.
The correct way for insurance to operate is that you pay a higher premium while your risk is high, and a lower premium while your risk is low. Averaging out the high-risk and low-risk times is not the function of insurance.
An "efficiency" in an insurance product is usually an absurdity. The ideally "efficient" insurance product is no insurance at all!
Nonsense. You're assuming perfect knowledge of the future. Insurance operates in the real world, where the future is uncertain. If you actually knew what the outcome would be then you wouldn't need insurance, but all you actually know is how likely each outcome is projected to be. Efficient insurance means not paying more than you have to in premiums for coverage against a particular outcome. Since underestimating the risk means the insurance company eventually goes out of business, and overestimating it means you pay too much in premiums, the efficient price is the one where the risk is accurately assessed and there is sufficient competition to keep the insurance company's margins in check.
Quoting myself:
To achieve its ultimate goal and replace all other currencies, the price would have to be about $3,000,000/BTC in today's dollars, based on the world GDP and the 21 million BTC limit.
In retrospect, it doesn't make sense to simply divide the global GDP by the number of currency units, since that ignores the velocity of money, clearing, etc. For a more apples-to-apples comparison, the sum of the USD and Euro M2 figures (after converting euros to dollars) is about $22 trillion. This represents all the dollars and euros presently in circulation. To replace just dollars and euros, ignoring the rest of the world for the moment, would require a price above $1 million per bitcoin. That's the wildly-optimistic view, of course; even if Bitcoin is successful, which remains a big "if", it may not fully replace conventional currencies.
I'd suggest you reword this statement for internal consistency. As commodities can also be investments.
Fine. Bitcoin is not an investment operation. It's as much or as little an investment as you want it to be, like anything else, but that's hardly relevant here.
Again, nowhere does it state that the promise of a return comes from Bitcoin itself. This is not required to classify as a Ponzi scheme.
It's required if you want to call Bitcoin a Ponzi scheme. Otherwise you only have a Ponzi scheme which happens to involve bitcoins, much like many other Ponzi schemes involve the U.S. dollar.
There's groups of people, each hoping that the next person in is an even bigger sucker than they are.
While I'm sure such groups exist, that isn't sufficient to make Bitcoin a Ponzi scheme.
Which is more or less what's happening here.
No, it isn't, because no one is making promises of high returns—the most important part, which you seem to have conveniently skipped over. Bitcoin may well be in the middle of a bubble at the moment, though just how much of a bubble and where the price will end up are open questions. That doesn't make it a Ponzi scheme.
If you find someone who is promising that buying Bitcoins will provide you with high returns at low risk, then I would agree that that person is running a Ponzi scheme. It would be their Ponzi scheme, however, not Bitcoin's. Calling Bitcoin a Ponzi scheme is as misguided as calling gold, or oil, or tech stocks Ponzi schemes—they've all experienced similar bubbles in recent history.
For that matter, even calling the Bitcoin market a bubble doesn't really characterize the situation. It's a new thing, with a lot of potential, but also a lot of enemies and technical, social, and legal hurdles to overcome. No one really knows what to make of it. If it fails, the current price is obviously way too high. If it succeeds, however, then it's hard to argue that the current price is anywhere near high enough. To achieve its ultimate goal and replace all other currencies, the price would have to be about $3,000,000/BTC in today's dollars, based on the world GDP and the 21 million BTC limit. Thus the large price swings—they reflect the underlying uncertainty about Bitcoin's future. It's not really a bubble because you can't really argue that it's being priced above its rational worth. It all depends on how you expect this experiment to turn out.
The trouble with ignoring them; is, if the BTC are ignored, then they can be used as a vehicle to avoid or delay tax liabilities and information return reporting that would otherwise occur.
I don't dispute that, but how would it differ from capital gains, or for that matter income from marketing or other expenditures made with the intent of indirectly increasing future income? These also have the effect of delaying tax liability, and there is no reporting on their present value, only on the realized gains. (At least for individuals; it may be different for businesses.)
If bitcoins end up being classified as assets for tax purposes, individuals would still only report them as capital gains when they sell them or trade them for other goods or services.
A Ponzi scheme is a fraudulent investment operation that pays returns to its investors from their own money or the money paid by subsequent investors, rather than from profit earned by the individual or organization running the operation.
That's the definition of a ponzi scheme and the current way cash equivalency for BTC is attained.
Tell me I'm wrong.
You're wrong. Bitcoin is not a Ponzi scheme.
1) Bitcoin is not an investment. You're not paying for a stake in an operation, you're buying a commodity.
2) Consistent with the first point, Bitcoin doesn't promise or pay returns. You don't get anything "from Bitcoin". You may be able to sell your bitcoins later for a higher (or lower) price than you paid, but there are no guarantees.
3) There is no individual or organization "running" Bitcoin. That's the whole point—it's decentralized, with no one in charge. There is no one to run your hypothetical Ponzi scheme.
The primary identifying factor of a Ponzi scheme is promises of high returns for little risk, with actual returns being paid out of investor's own funds. Bitcoin cannot qualify because no one qualified to speak for Bitcoin (and there really isn't anyone qualified to speak for Bitcoin) has made any such promises.
Don't take my word for it, however. The SEC has its own document describing Ponzi Schemes Using Virtual Currencies. Note carefully that while they discuss some Ponzi schemes that involved Bitcoin, they never try to claim that Bitcoin itself is a Ponzi scheme.
So far two people have responded saying that Bitcoin clearly falls under a particular section of tax law. However, you've argued—reasonably in both cases—for different sections, commodities and cash-equivalents. I think this illustrates the GP's point quite well.
Personally, I think you're both wrong. If you look into what Bitcoin really is, it's really closer to reputation than a commodity. What you really have, when all is said and done, is the agreement of other Bitcoin users that the person in possession of a particular private key controls a particular number of bitcoins. There are no actual bitcoins (not even as data), it's just a unit of account, like points in a game. Now, these "points" happen to be worth something, but only so long as everyone else plays along.
From a tax point of view, just as it would be unreasonable to tax someone on the value of their reputation, it would be unreasonable to tax them on the present value of their bitcoins. It makes much more sense to ignore bitcoins per se and treat their sale or exchange for other goods or services as regular income, with deductions for bitcoin-related expenses.
Only if you want to be able to bootstrap a fully validating node from scratch. However, there is no particular reason why you couldn't bootstrap a fully-validating node from a checkpoint of another fully-validating node (plus the blocks since the checkpoint), rather than replaying all the blocks in the blockchain dating back to the genesis block. You'd have to trust the checkpoint, of course, and all data on previously spent transactions would be lost.
To guarantee anonymity regarding past transactions, however, you'd need to be sure no one has a full copy of the blockchain, which is impossible. Anyone with sufficient dedication could preserve all the data for posterity. Pruning is a solution to the disk space and CPU requirements associated with saving and validating the full blockchain, nothing more.
What processor takes more than 1 cycle to test a value other than 0? Educate me, please.
You can often do away with the extra test altogether when you're comparing against zero, provided the decrement operation sets the condition bits. It's also fairly common to have dedicated counters and "decrement and branch if not zero" opcodes. If you're comparing against a non-zero constant, and the compiler doesn't optimize the comparison away, that's at least one extra instruction and one extra cycle in the body of the loop. In optimized code the space required for the extra opcode can be just as important as the time to perform the extra arithmetic.
Counting up from 0 to 99 in PowerPC assembly:
Counting down from 100 to 1:
or even
BitCoin is not like this. A bitcoin is a unique value and as it is passed from one wallet to another, that transaction is logged throughout the network. For any given bitcoin, you can trace the path of THAT SPECIFIC COIN from the time it was created to where it was today - seeing all of the wallets it passed through and what IP address owned that wallet at the time.
Bitcoins are not unique values. They're abstract concepts. The blockchain doesn't track ownership of specific bitcoins; it's more like a ledger, tracking how many bitcoins each address controls. The blockchain also doesn't track IP addresses; some of the monitoring sites report an address, but that isn't guaranteed to be the real address of the wallet. It's just the IP address observed when the transaction was first relayed, and very easy to spoof even without using a protocol like Tor to hide the source.
On top of that, a properly implemented mixing service makes it impossible to associate particular inputs and outputs. As a trivial example, consider a transaction with 1000 inputs of 1 BTC each and 1000 matching 1 BTC outputs. Let's say you know that five of the input transactions can be traced to a sale of stolen property. There is no way to know which five of the outputs are controlled by the same person or organization. It could be any of them—or even none of them, if the mixing pool retains a balance.
Those two dollars have different serial numbers. ... in the eyes of the government, the law, and everyone under the sun, all individual dollars are the same and interchangeable - my dollar is as good as your dollar.
First you say that every dollar has a unique serial number, and then you turn around and say that all dollars are interchangeable. Which is it? It's only convention which says that dollars aren't treated like other stolen property when you are found holding one with a serial number known to have been used in a crime. If anything, bitcoins are even more fungible than dollar bills. They don't have unique serial numbers. Many transactions draw from multiple inputs and most send to multiple outputs (the destination and a unique change address), which means that a certain amount of mixing is built in to the protocol. After a couple of normal transactions the most you could say about any particular output is that a certain fraction of the inputs, several generations removed, were known to be tainted.
You buy $1000 worth at $1, do you get out when they hit $5? $25? $100?
Here's a simple suggestion: every time the price doubles, sell 33%. I would say that is a reasonable balance between long-term potential and realizing your gains while the realizing's good. (No guarantees about this being the best strategy, though.)
In this example, after the price reached $64/BTC you would be left with about 87.8 BTC (worth $5,619) and $9,237. That's a lot less than $64,000, of course, but it's also a lot more than what you started with, both in BTC and in USD, and you're not exposed to nearly as much risk along the way.
The chore of figuring out how and where to put it on my tax form is not worth $133.
Really? It's no different than trading stocks, collectables, or other commodities. If all else fails, just write it down as miscellaneous income. You might be able to report it as capital gains if you kept track of the cost basis. If you've ever held a yard sale or sold something on eBay you've gone through the process before.
Except a Tier1 ISP router edge firewall rule to block TCP port 8333.
*POOF* all bitcoin transactions in USA go to ZERO, and price soon follows.
A workaround would be published within the hour. The protocol doesn't rely on any particular port. For that matter, you can already join the network via I2P or Tor.