Re: Bitcoin, I most strongly agree with the following:
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It's not meant to be a store of value. (Score:5, Informative)
Like all currencies, it's main use is as a medium of exchange. It's pretty decent as that, but sucks for storing value.
The two purposes are not mutually exclusive. (Score:5, Insightful)
Re:The two purposes are not mutually exclusive. (Score:5, Insightful)
Nah, they suck as a medium to store wealth for more than short periods of time. What the OP is missing is that currency is a method of account: A ton of prices are set up with respect to a currency: This is why, say, having oil be priced in dollars and not in Euros was such a big deal a while ago. High demand for currency as a percentage of GDP is telling you that all of the things that are far better stores for wealth than money are just no good (ie, a recession), or that the currency is not really a currency, but a commodity that you are speculating with.
Which is why Bitcoin is not something that really resembles a currency: The supply increases slowly, its value vs anything that you could want to buy with it fluctuates wildly, and most of the inventory is being held by people hoping it will go up, instead of actually being used.
While an electronic coin is theoretically possible, the Bitcoin implementation shares more with a pyramid scheme than with a real currency: Everyone that holds it wants to hype it so that it goes up in price vs actual currencies, but if the usage drops, it's useless, and only the people at the top of the scheme, those that mined very early, get anything that resembles a return.
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Re:The two purposes are not mutually exclusive. (Score:5, Interesting)
It not only has value as an investment (I personally put about $1000 in when the price hit $14usd/1btc, sold half at $55 and half at $65 and made quite a bit of money), but it also is useful for grey market transactions.
For instance, I purchased some Modafinil, a prescription drug which is hard to acquire in the US but is non-recreational and not of concern to the DEA, and I used bitcoins to do it simply because it was the only way to easily pay in such a way that the vendor didn't know anything about me beyond the wallet ID of the one-time use wallet I generated specifically for this transaction, I don't know anything about the vendor outside of his (probably also one-time-use) wallet ID, and yet I ended up with some Modafinil and he ended up with some cash.
As a long-term investment, Bitcoin is ludicrous; I agree with this. The price is about to crash as the new ASIC miners come out, and this cycle will likely happen again several times before we hit the 22 million hard cap, which makes it the domain of day traders, not investers. But as a currency, it is wildly more useful than USD, or whatever. You can send bitcoins to someone quickly, easily, and without using a third party transfer service. You can easily purchase bitcoins using cash with websites like localbitcoins.com. There are many websites selling legitimate products, things like computer hardware or ebooks, and the list grows every day.
Bitcoin's value is not as an investment. Bitcoin's value is that, even without the backing of a major government or whatever, it has value as a currency simply because of its featureset.
We don't consider the 'featureset' of a currency very often, since most currencies have exactly the same featureset as every other currency; you can take it to a bank and change it into 'electronic' money, deposit it into your paypal, etc. But bitcoin has all of those features built into the actual currency itself, with no reliance on third parties and built-in (relative) privacy.
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I also agree that it's in a bubble and about to crash.
However, I don't understand what the new ASIC miners have to do with it. I thought that the total bitcoin mined collectively per day stays pretty much constant regardless of the horsepower thrown at it (it self adjusts).
What concerns me more is the cost of collective mining is proportional to the price. So looking at this chart, you can see periods were many bitcoins were gobbled up and calm periods, where I think that the transactions were due mainly to
Re:The two purposes are not mutually exclusive. (Score:5, Informative)
If Miners leave the system, then the computational complexity goes down for verifying blocks. If the price of Bitcoin goes up (which it must with greater usage), then mining becomes more profitable, and will attract more minors.
Really the system works pretty well to balance itself, and likely has nothing to do with a possible crash in price.
If you look over at LiteCoin, a much less popular crypto currency derived from Bitcoin, they just has a large run up, then dropped over half their value. But in the end, they still didn't fall back to their original run up price. They are likely to continue to rise in price as compared to other options.
Really, I think the fears of Bitcoin crashing are overblown. Right now Bitcoin has a capitalization of almost 800 million. Quite a bit, but nothing like the 68 billion capitalization of eBay (PayPal). At LEAST a billion or two of that can be contributed to PayPal. And people think Bitcoin is over valued at a fraction of that? When Bitcoin arguably better addresses the same problems of facilitating transactions, only better, cheaper, more securely?
Re:The two purposes are not mutually exclusive. (Score:5, Funny)
Great.
The best way to get bitcoin regulated is when people hear you can use it to attract minors.
Re:The two purposes are not mutually exclusive. (Score:4, Funny)
Is bitcoin a gateway drug? What's next, ByteCash?
Re:The two purposes are not mutually exclusive. (Score:4, Insightful)
Paypal and Bitcoin are apples and oranges, though, although I get what you're saying. When paypal collects a fee, that goes right into the company coffers, and therefore part of the shareholder value. Bitcoin transaction fees just go to the miner that collected them. The investors get nothing. Instead they get to pay around 12% interest per year to the miners (currently, of course this will drop).
Valuing bitcoin is a tricky business, a lot like valuing gold, but different from that also. The weird thing about bitcoin is that, unlike gold, it's value doesn't change with the amount used. For example, 20,999,999 BTC could be locked away by long term investors, leaving 1 BTC for the entire economic side of bitcoin to run on, and the economy would work just as well as if it had all 21M BTC to work with.
However, in the first scenario, if an investor decided to cash out, it's the economy that must support him. So if he sold 1 BTC, then the entire circulation of bitcoin in the economy would double in size in terms of BTC, which would cause the value of all BTC to drop to half. This is really important in understanding bitcoin in my opinion, because compared to a regular stock, where future events can be baked into the price, the price of Bitcoin cannot similarly be.
Why not?
Because the price of bitcoin must equal the amount being circulated, times the amount of currency in regards to intrinsic worth each of the players in the economy need to conduct business. In other words, consider the example where only 1 BTC was used by the economy and the rest tied up with long term investors. Every time a consumer wanted to buy a TV that normally goes for $1199, they'd have to get that amount in Bitcoin, whatever it might be. Similarly, a business would need it's cash flow for it's purchases, and refunds, etc. So, take that amount as valued in USD, and divide it by the amount of Bitcoin available to the economy, and you get the price that USD/BTC has to be. After all, if it wasn't, then consumers would have to adjust their transitory holdings, businesses would have to adjust the amount used for cash flow until it was.
So, in essence the investors are facing a situation somewhat like the prisoners dilemma. Cash out before everyone else to get most of the profit. But if no one cashes out, or more people cash in than cash out, and the price goes higher, because you squeeze the economy into less and less remaining bitcoin. In a normal system with physical goods, eg. gold, the value of the economy decreases as more investors pile in and start locking gold in vaults, which means less rings for sale, so the effect is tempered. But with bitcoin, this steam valve never get released..
Can you guess what happens here? Both forces diverge, when one is strong the other is weak. Investors buy more and more of BTC, so the price of BTC hits the roof, so some investors cash out, and then it hits the floor, because the bitcoin economy has more BTC to work with, and the price of BTC has to match the total intrinsic value amount needed to run the economy divided by the economy's share of the Bitcoin. (The fact that investors can cash out at anytime cannot be baked into the price). And again, in circles. And the nearly unnoticed people trying to work an economy lose and gain and lose and gain. Until they get sick of it, and shops slowly go belly up or refuse to take BTC, until it dwindles to nothing. And the bubbles one after another start to fade, along with the economy, until nothing is left.
Re:At a crude level, how does this work? (Score:5, Informative)
You're way off. I'll give it a try, but its kind of a complicated system.
First, let me give you the upshot. Imagine miners as a collective unit. Every 10 minutes or so, 25 bitcoins created out of thin air are competed by all miners and then won by a single one. No matter how many miners there are, the number of bitcoins up for grabs doesn't change. Imagine a wealthy person throwing a scrap of bread into a crowd of beggars below, all competing to try and get the next piece, and you'll get the idea.
How does this benefit the system? What is this mysterious work that needs to be done?
The heart of bitcoin is just an electronic order book. It contains every transaction from the beginning of bitcoin written in to it. To find out how many bitcoins you have, you consult the order book which is freely available public information. It's available through P2P sharing, somewhat like bit torrent. Every time someone makes a trade, it's written in this book. (Public key cryptography is used to prevent unauthorized entries. That is, you sign a transaction with a private key of the sender and the public key of the receiver.)
The problem that mining attempts to prevent is as follows. What if a hacker makes a copy of the existing Bitcoin order book and then buys a Ferrari or something for 10,000 BTC in the real account book, and then uses a botnet to try and pass off his copy as real. If other people don't know which is which and start using his copy he made, then he can re-spend the 10,000 BTC on a Lamborghini in his copy. This is know as the double spend attack.
You might think that the order book should just be stored at an official place like bitcoin.com or something, and that's that. However, one of the design goals was to prevent a central authority from being needed, because a central authority can be shut down. If the US government decided one day to seize bitcoin.com, then in that case, Bitcoin would no longer exist.
So, here is how mining works, and prevents the double spend attack. Every time a time a transaction is made, it's given to the miners. Each miner take a number of transactions, and hashes them with the entire order book, the date timestamp, and a random number. (They also add some other information such as the address where the reward goes to). If the final hashcode they get is below a certain value, called the hash target they win. The hash they use is 256 bytes long, and the hash target is very small, ex. 00000000000000000000000000000000000000000000000000007F345334478. If they lose, they have to try again with a different random number. They win very rarely, but since miners have fancy exotic hardware meant to do this operation millions or billion of times a second and there are so many of them, someone does eventually find it. When someone wins, he shares it with everyone in the P2P network who all update their order book and the game starts again. If it took over 10 minutes to find the hash target for the previous block, the hash target is made higher, so it will be easier next time. If it took less, it is made lower. In this way, it balances out, so a miner wins around every 10 minutes, regardless if the total number of miners grow or shrink.
How does this help prove the order book is not a copy? Imagine that miners worked at the Animal Crackers factory, and the factory wasn't perfect, so % 0.01 of the time it would make an animal where its head was upside down. If a miner found that, he would take a picture of it and show it to everyone would then in turn put then put it into their copy of the order book (and the miner would be paid for doing so). Whenever there was confusion about which order book was real and which was not, you'd take a look at the two copies, and simply count the pictures of animals with its head upside down. Whichever had the most pictures would be considered the official order book.
So, if some hacker made a copy, the only way they could pass it off as an official order book is if they also found animals with their head's upside down faster than everyone else. Since there are so many other miners looking, this isn't feasible.
I've left out some details, but that is the general idea. I hope it helps. If you have any questions, I'd be happy to answer them.
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Are you kidding me? (Score:4, Insightful)
"But as a currency, it is wildly more useful than USD, or whatever."
That is one of the most moronic things I've read about bitcoins. It is hardly usable as a currency. You've found a few specialty shops that will take it for payment. Good for you. I can find an entire COUNTRY of stores that take USD, and plenty of places around the world. Go have a look at Amazon.com, look at what you can buy there, for US Dollars but NOT for Bitcoins.
You seem to be all caught up on the fact that you can "send" Bitcoins directly to someone else. So what? That is a semantic argument. All currencies are just shuffling bits around in computers anyhow. The details really don't matter, what matters is how easily you can use it to pay for things. Bitcoin is very hard, few people accept it and, surprise, surprise, they convert it to real money as soon as they can. US dollars are very easy, they are accepted all over the place.
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If I converted all of my USD to Euro, and then all of the problems with Greece, Cypress, and Spain got sorted out and the Euro went up in value, and I turned all my money back into USD, I would say that I had "made quite a bit of money" in the exact same way, and I don't think that anyone thinks that euros aren't "real" money.
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I don't think that anyone thinks that euros aren't "real" money.
They're way to colourful to be real money. Just like the Canadian dollar.
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While an electronic coin is theoretically possible, the Bitcoin implementation shares more with a pyramid scheme than with a real currency: Everyone that holds it wants to hype it so that it goes up in price vs actual currencies, but if the usage drops, it's useless, and only the people at the top of the scheme, those that mined very early, get anything that resembles a return.
But the thing is every currency is useless if the usage drops. Ask the people who had plenty Reichmarks or Zimbabwean dollars or Soviet rubles how that worked out, whether it's fiat money or gold standard doesn't matter since they'd never be able to convert all that money to gold if everyone wanted to cash out. That promise is as worthless as the paper money it was written on, sure you could do it in good times when you could have bought gold for it on the commodity market too, but not when you'd actually n
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Bitcoin doesn't exactly have pyramid scheme dynamics. Rather, it has bubble dynamics. The winners those who jump off right before the bubble bursts, the losers are those who do it too late. I've seen estimates/claims that Satoshi (and possibly his friends) sit on 1.2 million bitcoin, which they never have moved. That is a lot of money, but it could quickly become worthless.
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While an electronic coin is theoretically possible, the Bitcoin implementation shares more with a pyramid scheme than with a real currency: Everyone that holds it wants to hype it so that it goes up in price vs actual currencies, but if the usage drops, it's useless, and only the people at the top of the scheme, those that mined very early, get anything that resembles a return.
You mean like every fiat currency out there as well, including the US dollar?
Currency doesn't have to be useful for storage (Score:3)
Its job is to support current transactions, and to circulate. As long as it's vaguely stable for short periods of time, compared to the transaction speed, amount of it available and the willingness of commodity providers to accept it, that's good enough. Immediately after the US occupation of Germany post WW II, cigarettes were the main practical currency, even though they weren't very storable, had a random value, and weren't easy to use in large quantities, because there was enough supply available from
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I have to agree with the OP. The two purposes might not be mutually exclusive, but a currency can certainly be "useful" for one purpose and not the other.
From a USAian perspective, the $US is (for now) a global medium of exchange and easily carried. Unfortunately, the dollar has lost over 90% of its value since the inception of the Federal Reserve. Right now, they are eroding the value with $85 Billion per month in artificial credit expansion. Is the currency really a store of wealth if the purchasing p
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Bingo. For a medium of exchange, BitCoin has a lot of positive aspects. However, until it becomes a mature currency, one is best moving value into it, doing the buy/sell, then moving out of it as fast as possible.
On the other hand, the best medium of exchange that holds its stored value would be precious metals. Gold is the most popular and with proper assay certificates stored with the medium, the chance of getting a fake bar can be fairly low. However, gold isn't as good for an exchange mechanism as a
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I do not doubt that the US government will try to regulate Bitcoin, fail, and then try to outlaw it. That will still have very little effect on Bitcoin as it does not rely on recognition by the US government. They would have more chance of trying to outlaw the rouble. I think that they should just ignore it and let it dwindle into obscurity instead of giving it constant limelight and coverage.
Re:The two purposes are not mutually exclusive. (Score:4, Funny)
I store my money in my well fed family.
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Oh my god where do you armchair investors come from? Store your value in stock? Bonds? Land? You're nuts.
Do you know how bonds grow? You take a risk in bonds. Bonds are usually sold; they can lose value, and you have to wait out the maturity term, taking small amounts of interest, missing opportunities, to avoid losing value. If you suddenly need the value stored in your bond, you may have to sell it at a loss greater than the loss of inflation--because you have less physical dollars at the same defl
What's bitcoin? (Score:4, Insightful)
Seriously, with the number of bitcoin articles here, hardly anyone should be able to honestly vote that.
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I kind of know what it is, but I don't really know. it's like those articles about 'raspberry pi'.. they all assume we're supposed to know what it is and that we're supposed to care. At least Bitcoin has a name that gives me some idea of what the product is used for. And I know that it's a virtual currency, but I've never seen an option to pay in bitcoin anywhere.
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I say why would people bother, but there are people out there who very much believe in bitcoin as a real alternative currency and who have a very low opinion of people who are
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I don't think a lottery is the correct description. In a lottery, if you bought every single ticket, your expect return would be about 50 cents for every dollar you invested. In Bitcoin, you invest your hardware and utility costs, and the expected return is greater than $1 for every dollar invested. Otherwise, why would people bother?
I agree with your conclusion. But the lottery comparison is slightly broken.
"expected value" includes probability so there is no need to buy every ticket, just a statistically valid sample. Plus it is even worse than you predicted (at least for the big name lotteries) because it varies with the current prize payout (e.g. typically the jackpot amount is not fixed).
And to add some concrete detail, currently since Powerball was just won the expected value is $0.50 on a $2.00 ticket, where $0.36 is from the f
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But on the bad side, as far as I can tell Bitcoin is a fundamentally deflating currency. The more time passes, the more the rate of new coin creation diminishes. So the longer you hold yo
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The End-Game (Score:4, Interesting)
If bitcoin continues long enough to reach the end-game, wouldn't it create a deflationary spiral?
Re:The End-Game (Score:4, Informative)
Yes, which is the exact same problem as using the gold standard - there's only so much gold out there (and it has way more uses than sitting in a vault backing currency).
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In what sense do you mean "deflationary?" Do you mean that the price of everything else denominated in bitcoins would decrease (as in ordinary currency deflation) due to scarcity?
I don't think so, because bitcoins are not like an ordinary commodity that people want for its utility, thus there can never be a shortage. If people want to store more value, they have the alternative of using dollars or euros, for example, or physical commodities like gold or real property. Also, new digital currencies with la
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As opposed to trying to make something with unlimited availability have value?
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If you mean that the prices of goods and services in bitcoins will continue to decline, then yes.
Contrary to the endless propaganda being spewed by central bankers, so-called "mainstream" economists and the media, deflation is a good thing, not the bogeyman. In fact, it should be the natural long-term trend, with periodic short term cycles. Technological advancements and productivity gains should be increasing the purchasing power and increasing standards of living for wage earners.
Eroding the purchasing
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Bitcoins sure seem to have had a goal of making sure that a Bitcoin never loses value. Unfortunately, the real world never works that way: Tools and equipment depreciate and have to be maintained. Arable land loses its fertility. A good house becomes a bad house because drug dealers move into the neighborhood. Business investments can go south. Perishable commodities like food spoil. Countries and their currencies fall as surely as they've risen. And Bitcoins only have value as long as people are willing to
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Currently, bitcoin transfers don't get validated until a new block is mined. Would mining the last coin mean that no new transactions are possible?
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Fundamentally, a currency is backed by the resources of a country. The US Dollar is backed by the US GDP, the CNY by Chinese GDP, and so on. If US GDP increases, your USDs go up in value. Bitcoin however is backed by nothing. It has no intrinsic value per se, unlike currencies or stocks. It is valuable only because others think it is valuable. If tomorrow everybody thinks 1 Bitcoin is worth 100 USD, they are worth 100 USD. If everybody thinks they are worthless, they are worthless. It is the ultimate deriva
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Hopefully.
Making artificial inflation become impossible, should be one of the design goals of any currency. It's called "learning from mistakes."
Some people will mention mistakes have been made on both sides. So I guess it's a question of which ones are more recent and relevant. Is boom/bust your bogeyman, or is inflation & unbounded government debt your bogeyman?
Personally, I think volatility and
Bitcoin is simple, and complicated (Score:5, Insightful)
I love the idea of a decentralized, non-controllable, virtually anonymous (and truly anonymous with the use of proper laundries), non-government, non-corporation, currency. I love the idea that I can just send a few coins (or parts or whatever) as a tip to anyone else without an intermediary taking a cut. I love that I can use it for true micropayments, microdonations etc.
I support Bitcoins because, while it's not the best possible option, it's the best existing option.
But, I don't like that early adopters are massively rich. I don't like that the current chain is 2GB and rising (hard to download when your Internet connection is rubbish). And there are a few other minor issues with it.
But ultimately, I think that, as a tool to remove power from governments and corporations, it's a good one. It's a good currency to use to be paid in, and to spend, and to save for a rainy day. But, like any other store of wealth or capital, don't put all your eggs in one basket. Just like you don't put all your savings into stocks or gold, don't put them all into Bitcoins.
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I don't like that the current chain is 2GB and rising
That was last year. It's 6GB now. [blockchain.info]
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It's a good currency to use to be paid in
Perhaps.
and to spend
Definitely!
and to save for a rainy day
Most assuredly not.
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Why do you think that Bitcoins are not a good currency to save? I have an amount that, while the value against fiat currencies has varied, has generally increased in value. Sounds like a good investment to me. Better than certain stocks at least. And people do put their life savings into stocks. I've only got a small amount of capital in Bitcoins, but that's mainly because I don't want to hand over my details to an exchange. I would rather receive the BTC in exchange for labor done. Which is how I got most
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Why do you think that Bitcoins are not a good currency to save?
Because it's yet another fiat currency not based on or backed by anything of actual, tangible value.
Sounds like a good investment to me. Better than certain stocks at least.
I realize that's what all the lemmings have been conditioned by the media and Wall Street to compare things to: "Sir, where would you like this hot poker inserted; down your throat or up your ass?" :p
As part of a varied bundle, I can't see anything wrong with investing in, and using BTC.
It's all relative. Yes, I suppose I'd rather keep my wealth in BTC form, if for no other reason than its deflationary nature, than in stocks or rapidly-dying government fiat... but this baby, [kitco.com] despite T.P.T.B. sup
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Because it's yet another fiat currency not based on or backed by anything of actual, tangible value.
I hear this a lot, but I've yet to be convinced that shiny metals themselves are of actual, tangible value. Speculation and perceived value is what keeps gold prices where they are.
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I've yet to be convinced that shiny metals themselves are of actual, tangible value.
LOL! To tell you the truth, I wouldn't be convinced, either... unless, that is, I'd formed my opinions not on the insane silliness spouted by the media but rather on some actual knowledge of history... :p
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The value of a Bitcoin (unique to anything not patterned after Bitcoin) is the ability to engage in a transaction without the aid of any centralized third parties.
That is an intrinsic property of Bitcoin. And relatively unique to Bitcoin (and other crypto currencies).
You may not value that property, but it does exist, and some people do value it.
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The only reason a pyramid scheme is bad is because when people realize it's a pyramid scheme, there isn't actually enough money to pay everyone back. Although it's possible to describe bitcoins as a pyramid scheme, the money doesn't disappear the moment people decide to take it back. Although it's also possible to describe Social Security as a pyramid scheme, everybody already knows how it works so there's no surprise and the beneficiaries are poor old people instead of a handful of already-rich bankers. A Ponzi scheme is only bad because it will inevitably come crashing down on the poor fools who fell for it.
This is not how social security works. Social security works on the observation that people should make long-term investments so we don't have the elderly dying in the streets. Social security savings are supposed to be responsibly invested in long term securities, and guaranteed by the government so they give a predictable return (and being the government it means you can negotiate deals which are impossible for any smaller player). The US has simply managed to fuck the concept up since for some reason scr
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It's not quite anonymous, but it's incredibly easy to make it truly anonymous. And even if it's not truly anonymous, it's still worth an enormous amount.
It prevents corporations from blocking donations to undesirables (e.g. Wikileaks). It allows those who can't otherwise (e.g. if your poor in a third-world country, without a credit card or even a bank account) give microdonations, pay micro-amounts and receive donations and payments (through the use of an online wallet service, at an Internet cafe).
Just as
Crypto, value, etc. (Score:3, Informative)
I have a very conflicting view of Bitcoin. Here are a few of my thoughts on the subject:
1- Crypto: how do we know the bitcoin crypto is really good/really secure? Who has done an audit of the code?
Implications: Cryptography is a very hard subject to tackle. Many an encryption scheme has been cracked and left in tatters, that seemed formidable enough at first sight. If the bitcoin cryptography is cracked, then fake bitcoins can be ''mined'' (meaning: created out of thin air) and the whole currency disappears in a puff of smoke (so to speak).
2- Security: how do we know the bitcoin P2P client is really secure? Who had done an audit of the code? What about the currency transmission protocol?
Implications: if you can't "fake" bitcoins, at least you can intercept them out of thin air between Alice and Bob. What then? The same bitcoin exists twice and that cannot be good for bitcoins.
3- Obscurity: who is *really* the creator of Bitcoin? Why is he hiding behind a pseudonym?
Implications: Yes, being paranoid here - but, really, who is this "Satoshi Nakamoto"? Please read more here: https://en.bitcoin.it/wiki/Satoshi_Nakamoto [bitcoin.it] before criticizing this position. Essentially, and as long as we do not know who "he" is, the whole bitcoin-is-a-secure-digital-currency could be some very elaborate scam... Also, see point #1 and #2 above: I would feel a lot more confident in Bitcoin if the currency had been created by a recognized researcher in cryptography and digital currencies.
4- Economics: Bitcoin is essentially a ''fixed size'' currency... As someone has already pointed out, this has ''interesting'' properties, for various values of ''interesting''. If all bitcoins are mined then what?
Implications: once all bitcoins have been "mined", the only result can be a very serious "inflation" in the value of bitcoins if demand for this currency helds up - the only way to maintain a sustainable level of economic activity would be to raise the price of bitcoins by using it sub-division properties (yes, you can split a Bitcoin into smaller values). So right now 1 BT is, say = US$ 1. But what happens when 0.1 BT = US$1? This would imply staggering inflation in the implied value of Bitcoins and a Ponzi-like scheme, where the very first "miners" of BT would reap a staggering reward, leaving everyone else holding the bag. This could potentially bring a crisis of confidence in Bitcoin, and crash the entire currency, tulip-mania style.
You think I am going too far? There is now a cottage industry dedicated to selling you computing platforms (usually using Nvidia/ATI and OpenCL) to mine more Bitcoins. This, to me, smells of a ''mania'' phase, since, lest we forget, Bitcoins are completely immaterial and are not recognized anywhere except within circles of a dubious nature (Silk Road, anyone?).
In other words, yes, Bitcoin is fascinating in many ways... But I am not 100% sure this thing has been thought out in all of its aspects...
Re:Crypto, value, etc. (Score:4, Interesting)
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3- Obscurity: who is *really* the creator of Bitcoin? Why is he hiding behind a pseudonym?
Implications: Yes, being paranoid here - but, really, who is this "Satoshi Nakamoto"? Please read more here: https://en.bitcoin.it/wiki/Satoshi_Nakamoto [bitcoin.it] before criticizing this position. Essentially, and as long as we do not know who "he" is, the whole bitcoin-is-a-secure-digital-currency could be some very elaborate scam
Not more "scam" than the person who created the first 1000x1000 all ad, no content page, sold it for $1/pixel and made almost a million dollars in the dotcom age. Assuming he created it I also assume he mined lots of the early BitCoins which would, if it became a huge economy, be worth lots of money. At least, it wouldn't have to be more of a scam than BitCoin already is ;)
Currency has no value (Score:2)
It is ONLY a medium of exchange. Its considered good or bad depending on whether it can be counterfeited. While I find it an interesting idea to create a monetary system that is independent of any national power, I will not consider "another" unbacked currency. Especially a virtual one.
If you really want to make something, create a currency based on labor contracts. Offer your time for sale: I promise to work 10 hours on whatever legal project you would have me work on. And sell that. The
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Offer your time for sale: I promise to work 10 hours on whatever legal project you would have me work on.
This is basically the Labor Theory of Value, which argues that only work creates value. This formed the basis of the theory of capitalism created by one Karl Marx: The idea was that money was simply one kind of commodity that everyone had collectively decided can be exchanged for the results of other people's work.
For example, if I want a cheese sandwich, I can grow the wheat, thresh it, grind it into flour, add some oats and such that I've also grown, pull up some water from the well, bake some kind of bre
For me, Bitcoin's not a matter of technical trust. (Score:2)
I am opposed to bitcoin based on reasons other than trust, and those reasons are more important to me.
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It's basically a kind of pyramid scheme. The people who got in early win if more people enter later. They want us to believe in their virtual coin so that they can be rich.
Just don't understand (Score:2)
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If this process can grow then the currency will increase in value.
Another opportunity to get ripped off (Score:2)
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The exchange rates may not be negligible, but they aren't outrageous
Dislike (Score:2)
Fixing the monetary issues of today isn't complicated. It doesn't require knee jerk completely polar opposite ideas like bitcoin. It only requires regulation and reform.
1) The central bank
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You're confused about the purpose of government. Government is not in business to make a profit. That's what private entities do. Government exists to maintain fairness between people and groups, not to profit from them.
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>> The only medium of exchange that will work is one that is controlled by the government
Not true unless you are specifically talking about a fiat currency (i.e. one that governments can make out of thin air because it isn't backed by anything, so has no intrinsic value, such as the US dollar).
If you switch to a currency with or based on intrinsic value such as gold, silver, livestock etc. you dont need a government to control it. Such systems have already worked reasonably well for thousands of years
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Unlimited accumulation of wealth = bad thing (Score:2)
I think that long-term, unlimited accumulation of wealth is a terrible thing for society. Thus, the better Bitcoin is for this purpose, the less I like it. Ability to save some wealth is useful --- savings for a rainy day, a college fund for the kids, a nest-egg set aside for retirement. But, the ability for a tiny number of people to end up with thousands of lifetimes of others' wages (and the ability to throw that money around to assure that thousands more lifetimes will be spent serving their self-enrich
Not as a store of value (Score:2)
I wouldn't keep any money in bitcoins, but they can be useful for money transfer.
My more complicated opinion (Score:2)
As a store of value: Terrible.
As a medium of exchange: Great!
portability (Score:2, Interesting)
If I had a beef with bitcoin is its lack of portability. Now I know many of us a technical bent and in your head you went "what do you mean crazy man?!? I can use it on linux or windows or android! " well you don't understand the larger meta portability I am talking about.
I cannot put a dozen bitcoins into my pocket, hike into some remote area and trade them to the locals for goods and services. I cannot physically move a bitcoin and control who has access to it. I look at things like the bank seizures bei
BitCoin and BotNets (Score:2)
My biggest complaint about BitCoin is that it could very easily be used as a way for BotNet operators to monetize their exploits. The whole idea behind BitCoins' value (as I understand it) is that they should be worth the same amount as the processing power used to compute them would have cost. However, since the BotNet operators don't pay the costs of processing (those costs, in terms of electricity to run the processors are paid by the owners of the compromised machines), they basically get to steal money
Waiting for Bytecoin... (Score:5, Funny)
"Sending money" (Score:4, Interesting)
One thing I'm noticing in this discussion is the fact that apparently in America the concept of sending money directly from one person to the next is considered alien and revolutionary by many, even though you can do that with good old USD too. It's called a bank transfer. I think it's because the use of cheques is still so widespread in the US.
I've never understood that strange preference for paying by cheque. I did an internship in the US, and I could choose between receiving my wages as a cheque, or having it directly deposited into my bank account. I chose the latter, as I am used to that and it makes much more sense. I think I was the only one in the entire company.
I don't get it. Really, a piece of paper? That you can lose? That can be stolen? That's a hassle because you have to physically bring it somewhere to get your money? That can bounce (a really weird concept to me)?
Here in the Netherlands (and certainly most of Europe as well, I don't know about the rest of the world) it's extremely common to pay each other by direct bank transfer. It's how everybody receives their wages and pays their bills. If you go out to dinner together it's common for one person to pay the bill and everybody else to transfer their share to their bank account. It's fast, easy, safe, and secure. With the phone apps every bank has these days it's a matter of seconds to do. There is no "bouncing", once you receive the money it's yours. Very odd that it just doesn't seem to want to catch on in the US.
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Re:I don't give a shit about imaginary currencies. (Score:5, Insightful)
Including the Euro and the modern Dollar, by the way.
Either the stuff you pay me with is backed by something real... not just belief... or GTFO.
And I believe that if I offered you 1000 USD or EUR, that you would not tell me to GTFO and to come back when I had some zinc or hog bellies.
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Including the Euro and the modern Dollar, by the way.
Either the stuff you pay me with is backed by something real... not just belief... or GTFO.
The only thing that matters to you is what YOU believe. You believe in the USD and so do people that you trade with. There are plenty of people out there who do not believe in the USD, believe me, and they won't take it if you offer.
Bitcoin has a not insignificant following, but there are plenty of people who won't take it, and the most important of those people to your decision being you.
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No. The most important is what the people I want something from believe. If I believe that maple leafs are worthless, but my baker thinks they are worth a lot, and offers me bread for a few of them, then the maple leafs will get a value for me, namely the value that I can get bread for them. And if I don't have a maple tree, and I'm sure the baker will continue to accept them, I'll even be willing to give some things for maple leaves too, as long as I c
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It's valuable because you can't make more of it. You can find more, but it's a long, expensive process, and it get longer and more expensive the more you find. Kind of like Bitcoins actually...
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Stars 'make gold' all the time. Where do you think our gold stems from?
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Are you a star? I didn't say it wasn't possible to make more of it, but that we currently can't. If modern alchemy becomes possible, gold will be worthless as a currency.
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Gold is already worthless as a currency. It's prone to speculation and the additional supply you have coming onto the market at any given time is minimal.
What's more, the industrial applications for it is somewhat limited and most of the value presently comes from people hoarding it. In other words, gold has very little real value to it, and when times change and it goes out of fashion again, it will be right back where it was prior to the recent run up.
Then there's the issue of the assaying you need to do
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Its intrinsic scarcity makes it suitable for legal tender, but it doesn't give it intrinsic value. It's still only as valuable as people believe it to be.
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Re:I don't give a shit about imaginary currencies. (Score:4, Insightful)
Gold is just a shiny metal. Currencies are backed by economies, by work, labour, products, wealth. I think the latter has more intrinsic value than the former.
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Which would you rather own when your economy is experiencing hyperinflation? At that point your fallacy becomes obvious: gold _is_ something, whereas fiat currencies are merely temporarily _backed by_ something. I agree with you in dissing gold as a mere "shiny metal"; however as long as most of the world disagrees, both of us would be wise to respect gold's highly superior intrinsic value.
That value is not intrinsic, because as you say, it's only because most of the most believes it has value, that it does have that value. When people stop believing that, it stops having value.
When society collapses completely, which would you rather own: gold, or a piece of land? Land has intrinsic value. Gold doesn't.
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"Which would you rather own when your economy is experiencing hyperinflation? "
a good regulatory body is what In would rather have.
regardless of the currency base.
Of course currency based o gold is high subjective to other forces. It also limits growth. It's called the "Gilded cage" for a reason.
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Re:I don't give a shit about imaginary currencies. (Score:4, Insightful)
And in a desert gold a liter of water is worth more then all the gold you have after 3 days.
In fact if I have a big functioning economy, and all you have is a gold mine, then your gold is actually worthless. And you'll be really screwed if my people's culture say, viewed shiny things as senseless opulence.
It's a commodity.
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read like the crap from political campaigns or HR consultants?.... opinions, not the basis for an academic study.
Actually that's the point. Opinions are very suitable for academic study, and discovering opinions is the primary purpose of polling.
You wouldn't do a poll to discover facts of physics or any other natural law. You poll to discover what people think, i.e. their opinions.
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If I could demonstrate a Magic Spell to you, would that Spell have worth? What if it could allow you to moving any number (or fraction) of coins from your possession to anyone else in the world without the help of any centralized third party?
Would that have value?
Because that is what Bitcoin is. The ability to engage in transactions without involving any centralized third party. You might not consider that important, but some people do. What is Paypal worth? VISA? MasterCard? American Express? Hint:
Re:Mining (Score:4, Informative)
Since I am mining right now with my graphics card in the background, I will try to explain.
The bitcoin system has at it's core a database that records transactions between accounts. Transactions are grouped into sets called blocks, and they are chained together by using the hash of the previous block as part of generating the next block. We want the history of transactions to be hard to tamper with, including adding new, possibly spurious, transactions. Therefore to record a new block and have it be accepted by the network, a difficult condition needs to be met. Specifically, a set of new transactions, the hash of the previous block, and an unknown number (nonce) must result in a hash value below a value set by the software
Here's a recent block: http://blockexplorer.com/b/228196 [blockexplorer.com] You can see the hash value has a bunch of leading zeroes, and the Nonce (834654508) is a fairly high number. The only known way to generate a suitably low hash is to try different nonces till you find one that works. Anyone wanting to include a spurious transaction would have to find the right number faster than the whole rest of the network. This is extremely difficult. You will notice the first transaction listed says "Generation: 25 + 0.37485 total fees". Whoever found the right nonce for this block gets to send 25 newly created bitcoins to themselves, plus whatever transaction fees the other transactions in the block included. This is payment for the work done in maintaining a collectively hard to forge account history for everyone.
The Top500 supercomputer list (http://www.top500.org/statistics/perfdevel/) has a combined power of 162 Petaflops. The bitcoin network hash rate (http://bitcoinwatch.com/) is 630 Petaflops, about 4 times more. It's that massive level of computing power that makes the transaction history tamper-proof. The security of the accounts history, in turn, gives people confidence to use the bitcoin network to buy and sell stuff.
So to answer your questions directly,
1) They are not "pulled from the air", they are a reward for the difficult task of securing the database, which collectively other people are willing to grant to get the security. The validity of a hash is that it meets a difficult mathematical test, but is easy for anyone to check once found, by simply doing a hash of the raw block data and seeing it matches the announced value. If a block fails that check, it gets rejected by everyone and not added to the copies of the block chain.
2) It's not cheating, it's payment for useful and necessary work.