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Bitcoin Government The Almighty Buck

The Future of Cryptocurrencies 221

kierny writes "Today, Bitcoin, tomorrow, the dollar? Former Central Intelligence Agency CTO Gus Hunt says governments will learn from today's crypto currencies and use them to fashion future government-protected monetary systems. But along the way, expect first-movers such as Bitcoin to fall, in a repeat of the fate of AltaVista, Napster, and other early innovators. But the prospect of fashioning a better, more stable crypto currency system — and the likelihood that Bitcoin may one day burn — is good news for anyone who cares about crypto currencies, as well as the future and reliability of our monetary systems."
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The Future of Cryptocurrencies

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  • by Animats ( 122034 ) on Wednesday March 12, 2014 @04:14PM (#46467839) Homepage

    What we've learned so far from Bitcoin:

    • The distributed, eventually-consistent blockchain anchored by mining works and is quite robust against attack. Nobody has yet successfully attacked the basic Bitcoin system and stolen money. So the low level technology appears to be secure.
    • Irrevocable, remote, anonymous transactions are the con man's dream. Especially when they're assocated with a whole community of suckers who think anonymous anarchy is a good idea. The scam level in the Bitcoin world is huge. Over half the exchanges have gone under, and that was before Mt. Gox. Bitcoin-oriented "stocks" and "Ponzis" have an even worse record.
    • Personal computers are not secure enough to store money. "Bitcoin wallet stealers" are a major problem. Many "online wallet" services turned out to be scams. Storing Bitcoins safely while still being able to use them is quite hard.
    • Volatility is far too high for Bitcoin to be a useful currency. Since last October, Bitcoin has gone from $100/BTC to $1100/BTC to $600/BTC. Daily variation often exceeds 10%. The companies that accept Bitcoin for real products have to reprice every few minutes. Bitcoin behaves like a pink sheet stock. Too many speculators, not enough real customers.
    • There are scaling problems. Currently, every user has to have a complete copy of the entire transaction journal back to the first Bitcoin, and has to keep up with all the transactions as they happen. The confirmation process has a 7 transaction per second limit. Confirmations take about half an hour before they can be trusted; longer during busy periods.
    • "Mining" is more centralized than expected. The original idea was that "mining" would be a spare-time activity of each user's computer. In practice, "mining" is done in large data centers with custom water-cooled ASIC chips. Two mining pools control more than half of Bitcoin's mining capacity, and they have the power to set fees and change the rules.
  • Re:BTC != Napster (Score:5, Informative)

    by CrudPuppy ( 33870 ) on Wednesday March 12, 2014 @05:16PM (#46468525) Homepage

    I take mild offense to the OP insinuating that Napster "fell". It didn't fall, it was torn down by the claws of the RIAA who didn't have the foresight to even recognize this would be the future of media distribution.

  • Re:BTC != Napster (Score:5, Informative)

    by DanielRavenNest ( 107550 ) on Wednesday March 12, 2014 @06:07PM (#46468961)

    > anything traded is 'currency'..

    No, something generally accepted in the market as an intermediary is a currency. Direct trade (some of my stack of lumber for a dinner) is called "barter". Barter has the difficulty called "a coincidence of wants". You need people who both want what the other person has to trade. A currency simplifies this difficulty, in that I can trade my lumber for currency, then later find someone making dinner, and trade my currency for that. I don't have to find someone who wants my lumber AND is making dinner.

    For a currency to be useful as an intermediary, enough people have to accept it in trade. In theory, anything at all can become a currency, but in reality only a few items become the currency of a given community because of the network effect. Whatever is most used tends to get used even more. Which items gain early acceptance depends on their features: inherent usefulness, durability, portability, fungibility, divisibility, scarcity, and others. Fish are useful, but not very durable or portable. Cattle are also useful, and reasonably durable, and portable because they are self-mobile, and in fact cattle were used as an early currency. But they are not fungible (not all identical units), and not very divisible until you eat them, so other kinds of currency with better features replaced them. Sand meets many of the features of a currency, except scarcity - there's not much point in trading for your sand, when I can go get my own. Gold is better in that respect - it's not easy to go get your own, so if you want some, it's easier to trade for it.

    Gold is useful (you can attract women with it), and has all the other features except divisibility for small amounts, and portability for large amounts, so for a long time it was the best currency.

Never buy from a rich salesman. -- Goldenstern