Researchers Find Problems With Rules of Bitcoin 301
holy_calamity (872269) writes "Using game theory to analyze the rules of cryptocurrency Bitcoin suggests some changes are needed to make the currency sustainable in the long term, reports MIT Technology Review. Studies from Princeton and Cornell found that current rules governing the mining of bitcoins leave room for cheats or encourage behavior that could destabilize the currency. Such changes could be difficult to implement, given the fact Bitcoin — by design — lacks any central authority."
The main problem discovered is that transaction fees do not provide enough incentive to continue operating as "miner" after there are no more bitcoins left to be mined.
That main issue is actually the solution. (Score:5, Interesting)
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The transactions are BY DESIGN to subsume the block reward and will handily make mining worth the price of admission.
Re:That main issue is actually the solution. (Score:4, Interesting)
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The problem with transaction fees is there's no way to properly market them
It's called escrow. A trusted 3rd party that holds the money until transaction is confirmed and/or refunds transactions on bad deals. Essentially transaction insurance. Are you saying that credit cards aren't marketable?
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Melting your face off is half the fun!
main issue is the whole system (Score:2, Informative)
No. **maybe** we'll see a viable "crypto-currency" but we have not yet.
BTC's main issue is that **whoever** controls a BTC exchange and mining operation can manipulate the currency at will, especially at the pinch points like when BTC values decrease by half at intervals. It's not just that someone could game the system, its that there is absolutely nothing preventing them, systemically and externally.
BT
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everyone just needs to accept this: BITCOIN IS A SCAM
We all "just" need to take your word for it, or did you have anything to substantiate this claim?
Bitcoin is just a mechanism to transfer tokens ("coins") securely from one wallet to another, and gradually add tokens to the available pool by letting anyone who wants to mine them. There's no scam in the design; the scammy part is in the way we attached value to those tokens, and the way exchanges manipulate that value (or just take off with our coins). Calling Bitcoin a scam is a bit like calling tulip b
If it looks like a duck and quacks like a duck... (Score:3)
We all "just" need to take your word for it, or did you have anything to substantiate this claim?
Seriously, it *might* be that bitcoin is legit but frankly it is absurdly easy to paint the picture that bitcoin is a Pump-and-Dump [wikipedia.org] scheme. If I were to describe a hypothetical pump and dump scheme using a hypothetical digital currency, it would sound an awful lot like bitcoin. Doesn't necessarily mean that bitcoin is such a scheme but anyone who uses it without strongly considering the possibility is a fool.
Bitcoin is just a mechanism to transfer tokens ("coins") securely from one wallet to another, and gradually add tokens to the available pool by letting anyone who wants to mine them.
No it is NOT just what you describe any more than dollars are just printed pieces of paper we can
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The problem is what is the economic incentive? Do you want to use a currency where there is a real cost to using the currency? One of the premises of bitcoin was that we would no longer have to pay the middle man in a transaction, however now we need to pay the electricity company just to be involved in the process?
This kind of removes the incentive to mine. In the analogy of a real mine it's like you're operating the mine in your backyard despite making a loss on doing so all so you can keep using the doll
Don't underestimate the convenience factor (Score:2)
In the analogy of a real mine it's like you're operating the mine in your backyard despite making a loss on doing so all so you can keep using the dollar. You wouldn't do it. Unless the mining process can break even or at least remain cheaper than paying interest or transaction fees at financial institutions then there's no point in being involved.
Aside from the cost issue, there's also the convenience/nuisance factor to consider. I think most people would have serious objections to having to purchase, maintain and run a miner just to be able to make payments compared to paying an intermediary like a bank fees to take care of transaction costs for them.
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What currency doesn't involve real costs? The cost for printing and coining production of US currency is over $4 billion dollars. None of that covers the actual costs of the overhead of accounting, distribution and management of currency at the manufacturing and initial delivery level nor does it include the distributed costs of currency management by end user businesses (cash accounting, armored cars, bank fees for currency management, etc).
It's not like any of this is free to anyone, even the consumer,
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That's a false comparison because the reserve is not going to give up on the US Dollar simply because people are using bitcoin.
Your alternative world involves paying for mining AND upkeeping the current cost of the US monetary system. The only break you are getting away from is banking transactions and even then only if bitcoin exchanges don't charge a conversion fee because you're a US company and as such report in USD.
The middle man is still there (Score:2)
One of the premises of bitcoin was that we would no longer have to pay the middle man in a transaction
Which is largely a false premise. Virtually all bitcoin transactions will require exchanging bitcoins for other currency. This means you have to find a middle man to exchange the money and that is never free. Furthermore by taking out the bank from the transaction you have instead incurred a lot of additional risk (exchange rate risk, counterparty risk, volatility, opportunity cost, market risk, etc) which under any sane accounting carries a cost. You have essentially taken on the costs that would norma
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You raise a good point. However you must also understand that the middle man is, on average, making a handsome profit, or he wouldn't be there. So, on average, you will pay more going through the bank than you would taking on the risks yourself. In any transaction where you can't afford to bear the costs if things go sour you're probably better off using a bank - like any other form of insurance you're paying a fixed cost up front to avoid risks you're unwilling to take. But most of the time you'll be b
I must not be getting this.. (Score:2)
After all the bitcoins are mined, you can't mine them, right? Because they're all mined.
There aren't any left to mine.
So you can't mine them.
I don't see how this is a problem that incentives can solve, and I don't see how it is a problem period.
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using some algorithm I'm currently unfamiliar with so will not bother to explain in detail but the point is it exists, take a share of the transaction they facilitated as a "transaction fee"
The sender in the transaction specifies the transaction fee. The wiki [bitcoin.it] has more info.
"the person attempting to make a transaction can include any fee or none at all in the transaction. On the other hand, nobody mining new bitcoins necessarily needs to accept the transactions and include them in the new block being created. The transaction fee is therefore an incentive on the part of the bitcoin user to make sure that a particular transaction will get included into the next block which is generated. It
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The only people who will have reason to run a miner are the people who use bitcoins as a currency
You forgot those trying to do a "51% attack" for the purposes of killing or controlling bitcoin.
If mining rewards drop signinficantly and consequently lots of miners quit then said attacks will get easier both because they will require less hashing power and because there is likely to be a lot of uses mining hardware turning up on ebay at knockdown prices.
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After all of the bitcoins are mined, there is no longer an incentive to treat it in this goldrush-like manner.
That's the problem, actually. The gold rush provided a massive incentive for people to mine bitcoins, thus decentralizing everything, which is an important function of the economy, NOT because it mints new currency, but rather for its lesser-known purpose: to provide decentralized synchronization of blockchains and verification of the transactions made against them. This is a system that is inherently built on distrust, so ensuring that the synchronization and verification can occur in as decentralized a fa
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A mathematical model is just an assertion about relationships of things. It may be well-founded or a completely random guess. Drawing conclusions about the correctness of an assertion just because someone bothered to write it out as a formula makes as little sense as drawing conclusions about the correctness of an assertion just because someone wrote it in engli
Economics = science (Score:2)
Most of the time, economics is a marketing campaign trying to sell a particular product (like a mortgage)...
Your assertion is every bit as absurd as claiming that medicine is a marketing campaign because some people try to sell pills. Economics is the study of behavior with regard to scarce resources. Economists don't have anything to do with selling mortgages or any other specific financial product, nor does the field of economics. Economics most certainly is a science and is conducted using the scientific method. Economists develop a hypothesis, build a model to predict a behavior and then try to test that
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Economics and science have a common ancestor in PHILOSOPHY.
overblown (Score:2)
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and what do we know now about the bitcoin transaction fees & economic picture 20 years out).
That it will be a footnote in history ... just like Internet time by Swatch. Thats what we know about bitcoin 20 years out.
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With my pebble watch and a custom watch face I can tell you that the current swatch time is @150.
Did they actually look at the bitcoin rules? (Score:5, Informative)
Firstly, there already is a "tax" of the sort they say is needed. Currently the bitcoin relays don't accept transactions containing a tip of less than 0.6cents per kilobyte.
Secondly, there is nothing to force a miner to pick up a transaction, now. Right now, if a transaction doesn't contain a fee there is no incentive for the miner to include it in the block they are working on. Regardless of whether the miner includes transactions or not, they still get the mining reward.
Transaction fees are like an auction. The customer puts in a bid at the lowest price he thinks the miners will accept, each miner decides whether that fee makes it worth his while to include the block. If the customer wants the transaction processed quickly he will put a comparatively high fee on it so every miner will be interested. If not, they put a low fee on it.
This is called a market. It is how bitcoin is supposed to work.
Look at Visa and Mastercard (Score:2)
Visa and Mastercard tried this transaction fee model, and we all know they went out of bussiness. Case proven.
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Were they thrown out because they were proven incorrect or because economists, working for the banks and other large financial institutions, did their master's bidding? Because I can't help but notice that current economics neither prevented nor seem to be facilitating recovery from Great Depression 2.0. They have, however, done a fine job of justifying letting the infrastructure crumble to dust from lack of
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Re:Did they actually look at the bitcoin rules? (Score:5, Informative)
except the problem of criminals leveraging other peoples resources. When you can utilise bots to farm for you you can effectively undercut other peoples market making any legitimate miner completely unprofitable.
Said like a person who doesn't have a clue about the shear amount of resources being thrown at bitcoin mining.
Currently, the bitcoin mining network is doing 6,549,663,840,000,000 SHA-256 hashes per second [blockchain.info]. Lets say you have a botnet of 1 million Haswell's. The fastest Intel CPU there is, a Xeon, and it can't do more than 20M hashes per second [bitcoin.it]. So your 1 million Haswell botnet will manage to capture 0.3% of the bitcoin networks mining power.
Yes, people have speculated in the past that bitcoin might be susceptible to botnets. Even if was true the vulnerability window has well and truly closed.
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Yes, people have speculated in the past that bitcoin might be susceptible to botnets. Even if was true the vulnerability window has well and truly closed.
Don't be too sure.... a large botnet could potentially do some nasty things to the availability of the network ---- particularly, a Botnet with control of sufficient number of Bitcoins to generate an overwhelming volume of transaction spam, so legitimate transactions can't get through --- by using transactions of the minimum size, Or more traditio
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Don't be too sure.... a large botnet could potentially do some nasty things to the availability of the network ---- particularly, a Botnet with control of sufficient number of Bitcoins to generate an overwhelming volume of transaction spam, so legitimate transactions can't get through --- by using transactions of the minimum size, Or more traditional DDoS techniques such as packet storming the IP addresses of key nodes in the Bitcoin network.
A botnet in control of a huge quantity of bitcoin's, throwing them at the miners network in minimal transactions sounds like a miners delight to me. There is a minimum mining fee, so while in the short term it might cause the bitcoin miners to gag on their feast, in the long term all it will do is transfer that huge quantity of bitcoins to the miners. Why on earth would anybody do that?
As for traditional DDoS - the history of bitcoin is one DDoS after another. Just recently some bright spark must have de
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From the article:
"That threat began to feel genuine in January this year when the G.Hash mining group from China grew to control 41 percent of the network’s power, before backing off in the face of outcry. Nonetheless, the dominance of a handful of large mining operations suggests a 51 percent attack remains possible, whether from one growing or two colluding. G.Hash now controls 29 percent of the network’s power, with the next three largest controlling a further 42 percent between them."
What's
Re:Did they actually look at the bitcoin rules? (Score:4, Informative)
and you really think all that effort in mining is going to be maintained once the coin pool is exhausted and they are only competing for transaction fees?
Just about all mining is done using ASIC now, and ASIC's are in an unenviable position. Unlike CPU's and GPU's or even FPGA's, they are utterly useless outside of bitcoin. So they will remain deployed until they cost more in power to run than they get in mining fees. This means the current mining power isn't going away any time soon.
Botnet's can earn a return from a variety of sources, not just mining. So the question becomes "is it worth competing against the ASIC's"? In terms of power cost a top end Intel CPU's is roughly 100,000 worse than an ASIC. So even if some miners drop out Botnet's are unlikely to win more than a minor percentage. If the rewards of mining have dropped so much that ASIC's are dropping out, then it's a minor percentage of a small number. Add to that mining's soaking up 100% of CPU time makes an infection by the bot stand out, which decreases the half life of your botnet ... and yeah, I expect it will continue even when there are only transaction fees.
Then there is the whole other question of "does it matter?" If a botnet does take over the mining pool, there is the little issue that bitcoin is intrinsically worth nothing. It's not like they have taken over a pot of gold. Bitcoin is only worth something if people trust it. So if they don't undermine it, they have something that will pay out forever. If they do undermine it, they have got control of 2^51 bits that no one in the right mind would buy and their source of transaction fees has dried up.
It's weird actually. Claiming bitcoin can never succeed because it is worth nothing has to be one of the more popular meme's. The reality is being worth nothing is one of bitcoin's core defences. So far all currencies that have been based on something tangible (like e-Gold) have lacked that defence, and have failed.
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The current block reward is 25 * $577 = $14,425. This is huge compared to the current transactions fees.
Yes, it is huge compared to today's transaction fees. But mining fees will continue for some time yet. The bet is by the time they become insignificant mining fees won't be so small. A clue is the credit card network current roughly 10,000 transaction per second [transactionworld.net]. If bitcoin managed that at 0.6c per kilobyte (the fee bitcoin relays demand) mining fees would be $72,000 per block.
To gain an insight into the odds of that happening, Paypal processes around 9 million transactions per day, or 100 per second.
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Just throwing it out there, but it's really hard to talk about Paypal profits in dollars compared to a miner's profits in Bitcoins, mainly because BTCs are expected to appreciate relative to dollars (and in the steady-state case, will appreciate relative to consumer prices). A lot of Paypal's profits are not in the t
No big surprise there (Score:5, Informative)
Ignoring game theory, it's easy to see how the model of mining being only paid by transaction fees doesn't make sense. After all, mining security is something that benefits all holders of Bitcoin, regardless of whether or not they perform transactions, so surely all Bitcoin holders should be contributing to that security.
How do you do that? Make everyone pay equally. Currently that is how Bitcoin works due to the inflation subsidy. (about ~10% per year right now, leading to a per transaction cost of about $50) Just keeping that subsidy indefinitely at some sane level, say 1%, is perfectly reasonable. There's other options too, but fundamentally people like a free lunch.
-Peter Todd, Bitcoin developer
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OTOH it doesn't seem like the worst thing if there was a low level of constant
Cheats? (Score:2)
You can't win unless you cheat. That is what the system in general rewards. Liars win elections, thieves win on Wall Street, bullies become sheriff. Cheats and bullies are top dogs in today's society. They are the gangsters who write the rules. Bitcoin is just another chapter. If there was no way to cheat, it would never have gotten this far.
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Transaction Fees Change (Score:5, Insightful)
Such changes could be difficult to implement, given the fact Bitcoin - by design - lacks any central authority." The main problem discovered is that transaction fees do not provide enough incentive to continue operating as "miner" after there are no more bitcoins left to be mined.
I'm not sure that is an accurate reflection of the research, but if it is, it is not very good research. Transaction fees can change, and have changed. The minimum transaction fee changed from 0.0005 BTC to 0.0001 BTC during the runup to $1100, to keep transaction fees low enough for small transactions. There is a central organization, The Bitcoin Foundation [bitcoinfoundation.org], whose authority is explicitly derived from consent of the governed; the miners and users choose to update their software to match recommendations by The Bitcoin Foundation.
If that summary is an accurate reflection of the research, it sounds like they don't really know much about how Bitcoin works. I mean, I know that much, and I've only spent a few hours reading about it.
Re:Transaction Fees Change (Score:4, Informative)
The minimum fee set by default on the client the Bitcoin Foundation maintains (Now called "Bitcoin-core") was changed.
Any other clients or anyone who feels like doing their own compiling can set the minimum fee to anything they like, including 0, but there's no guarantee their transaction will ever get included in a block if they set it very small.
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The minimum fee set by default on the client the Bitcoin Foundation maintains (Now called "Bitcoin-core") was changed.
Any other clients or anyone who feels like doing their own compiling can set the minimum fee to anything they like, including 0, but there's no guarantee their transaction will ever get included in a block if they set it very small.
Right The big mining pools get to decide what the transaction fee should be. Only miners can validate transactions. The default value in the wallet is only meaningful if the big mining pools are willing to accept it.
Also, remember that the block chain limits Bitcoin transactions to about 7 per second. That limit was hit a few times back in the day (last fall, when Bitcoin was booming) and no and low-fee transactions didn't get through for days, if at all.
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>>The minimum transaction fee changed from 0.0005 BTC to 0.0001 BTC during the runup to $1100
>Which is exactly the problem they are referring to. The fee dropped to the point of being not worth it.
Er, what? The fee went from 0.0005 BTC to 0.0001 BTC because the VALUE of the BTC went UP.
Here is a hint:
0.0005 * $5 0.0001 * $1100.
Such arrogance.
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Er, what? The fee went from 0.0005 BTC to 0.0001 BTC because the VALUE of the BTC went UP.
No..... someone was apparently allowed to hastily make changes to decrease the minimum transaction fee in the client, because of some perceived increase in value on 3rd party exchanges that ultimately ended up being insolvent.
Since the price has gone back down, and BTC is now perceived to be worth even less than half as much on current exchanges as during that temporary runup ---- how come the minimum transaction
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The minimum transaction fee changed from 0.0005 BTC to 0.0001 BTC during the runup to $1100
Which is exactly the problem they are referring to. The fee dropped to the point of being not worth it.
Yes, but their conclusion is wrong in two ways, because the two parameters (fee and cost) are both variables.
The fee is actually a market-driven value, essentially a distributed real-time auction. Those who perform transactions bid for the services of the miners who generate the blocks to record the transactions. You're free to place any bid you want, but if there are higher bids available the miners will take those instead, so your transaction could fail to ever complete.
The cost, in computation, is a
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The fee is actually a market-driven value, essentially a distributed real-time auction. Those who perform transactions bid for the services of the miners who generate the blocks to record the transactions. You're free to place any bid you want, but if there are higher bids available the miners will take those instead, so your transaction could fail to ever complete.
I'm not sure I understand this. If "Joe" initiates a transaction with a very low fee, and no miner chooses to incorporate that transaction, is there any way for Joe to void the transaction and re-initiate it with a higher fee? If not, it seems to me that there is a danger that transactions may end up in no-man's land, with the bitcoins being "spent" from the purchaser's point of view, but with nothing showing up at the seller's end. In effect, money is lost. This looks to be a serious problem.
Bullshit (Score:4, Insightful)
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Really, what is the difficulty of mining when all coins are mined?
"The difficulty [bitcoin.it] is adjusted every 2016 blocks based on the time it took to find the previous 2016 blocks." So if it takes 14 days (2016 * 10 minutes) to mine 2016 blocks, the difficulty is exactly the same. If it takes more than 14 days, the difficulty is lowered. If it takes less than 14 days, the difficulty is raised. The difficulty has nothing to do with how many new coins are being generated.
Thus, if there are fewer miners, it will take longer to mine
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Re:Bullshit (Score:4, Informative)
They're saying that the fee wont be enough to keep people in. Really, but bother to read their counter argument before you spout off about it.
I RTFA. I countered this point in each of my replies. Here it is again. I'll even bold the important parts:
As miners pull out, it will get easier to mine blocks. There will never be a shortage of computation power to run the network, because if half the miners pull out, it'll get twice as easy to mine blocks. If 75% of the miners pull out, it'll be 4x easier to mine blocks. If 90% of the miners pull out, it'll become 10x easier to mine blocks.
Get it? Whatever the number of miners, transactions will continue to be verified at exactly the same rate. Look at the hashrate chart [bitcoinwisdom.com]. The network was chugging along just fine in July when there were < 1,000 terahashes/second. Now there are over 40,000 terahashes/second. So if 97.5% of the miners drop out, the network will run just as well as it did in July, that is, perfectly fine.
So when you reply, tell me again why it is a problem if some miners decide to pull out? Please don't just repeat once again that the article says that the fees will be too low and thus the miners will pull out. I get that that's what the article says. Why is this an issue, given the above?
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Except there is a hard cap on the number of Bitcoins, by design. At that point, there will be no more coins to mine, period, at any difficulty.
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Except there is a hard cap on the number of Bitcoins, by design. At that point, there will be no more coins to mine, period, at any difficulty.
You are confusing blocks with bitcoins. When the cap on the number of bitcoins is reached, you can still mine blocks, but the incentive for doing so is the transaction fees instead of the new bitcoins created by the new blocks.
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No, the point of the difficulty is to make attacks, err, difficult. Nothing to do with creating of bitcoins. If you are misunderstanding things this grievously, sit back and let other people talk for a while.
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Two things:
1) The transaction ratios here are of the order of 80 to 1, and the blocks chains are becoming ever more difficult to verify. How sustainable are these ratios as time marches on?
2) There is an inherant bias in verified blocks. Right now transactions are being selected, in part, based on their attached transaction fees. However, as the Bitcoin craze dies down, or even becomes mainstream, I don't see the practice of transactions fees catching on as individuals choose freeloading over payment.
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Sorry the transaction ratios are of the order of 80,000 to 1. I can't see this continuing as blocks become more and more difficult to verify.
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Besides, if miners do start to drop out, the difficulty will decrease (built-in n
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This was evident to those of us 3 years ago, who casually downloaded the bitcoin client, left it run for a week or so, and saw not one coin in return. We (by which of course I mean "I") subsequently lost interest and uninstalled the client.
Yep, bitcoin has been doing really poorly [bitcoincharts.com] over the past 3 years.
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That's a chart of a Ponzi scheme.
Crypto's Behave More Like Securities Than Currency (Score:4, Insightful)
Bitcoin for all its technical sophistication is more of a threat to "stock exchanges" or "equity allocation" than it ever will be to "currencies"
It is not suitable to a "drive-thru" transactions due to the number of "confirms" required to have veracity in the exchange.
However, it is VERY WELL SUITED to the exchange of equity -- and is, given the current settlement times, much more of a threat to public ledgers like TORRENS (property exchange logs) -- or stock/ownership exchanges.
2140 (Score:3)
Well, fortunately we won't have to worry about that until 2140. By which time I am sure transaction fees will be more than enough to compensate.
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And here we go again (Score:2)
Cue all the Bitcoin boobs about how this guy is wrong, and Bitcoin is justsowonderful and nobody who isn't slobbing the Bitcoin knob knows anything.
Bitcoin has basically shown that we've now supassed Barnum's Law. Suckers are now continuously spawning at a rate approximating the Planck Instant.
Game theory to fiat dollar system (Score:2)
harping on limited amount of coins (Score:2)
Can somebody explain to me WHY it matters if there is a fixed amount of coins when you can split a coin to something like 8 decimal places, price and buy things in fractions of a coin.
The dollar practically speaking can only be split into pennies. I can understand why you would need more money made. Bitcoin will probably ALWAYS have enough atomic satori to go around.
completely inaccurate (Score:2)
"The main problem discovered is that transaction fees do not provide enough incentive to continue operating as "miner" after there are no more bitcoins left to be mined."
That's 96 or so years from now. By then, they're hoping the volume of transactions makes the fees worth more than the block itself. Plus, the block will be cut in half many times prior to then so it will be even earlier that the reward
Peercoin (Score:2)
Issues such as this might encourage use of alternate coins that don't rely on mining in the long term (e.g. peercoin).
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Given the recent pace of problem discovery and theft do you really think it will last that long? I have my doubts.
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What the bleep? That's a pretty absurd way to write "$15,681,169,806,000".
Re: pfft (Score:2)
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Way back when ... (Score:5, Interesting)
Back in the 1920's when that great depression struck, many banks folded, and people who had money in banks ended up with nothing.
No matter for what reason the banks folded depositors were the ones left holding the empty bag.
Kinda like what is happening in the various Bitcoin exchanges. No matter if it's stupidity, lack of security, or malice, it's the depositors (whoever parked their Bitcoins in that exchange) ended up losing it all.
Well ... back to the 1920's.
When the banks folded, did people abandon the greenbacks ? Yes or no ?
Same situation here ... The fact that exchanges vanishing into thin air doesn't render Bitcoins invalid.
True, some of the "rules" are flawed ( I kinda have a sense something is amissed ever since Bitcoin came out, back in 2009, but I just couldn't pin-point what is wrong with it, but thanks to those scientists at least now I know, but I digress ... ) and they may need to be changed ( ... as been pointed out, the implementation of the necessary rule change may turn out to be very hard ... ) but all in all, the system of Bitcoin, at least, for the concept of it, is still as valid as ever.
Many people are digging at Bitcoin, trying their best to make it sounds as if it's something uncertain, something ephemeral, something "flash in the pan" but if we are to look at the alternative to Bitcoin, ie, the FIAT MONEY SYSTEM, it too has been damaged beyond repair --- as so much money was created out of thin air, which means, the value of the fiat money is no longer valid.
Re:Way back when ... (Score:4, Interesting)
Geeks who run with anarchists will be the first the anarchists turn on when "authorities" are gone. The greenback has an important phrase printed thereon "For all debts public and private" (within the USA.) Bitcoin has no such mandate.
And,. yes, people did abandon the greenback in the sense the greenback worth .05 oz. of gold was replaced by one worth .028 oz. in 1934.
Two hundred-thirty-some years after independence, dollars are still circulating because people believe in them. Still, there are those old-fashioned enough to disbelieve in "new" currencies and hoard an even more ancient and worthless material -- gold. And there are nearly three billion people who live in nations where gold is more desired than fiat currencies.
The world does not move as fast as true-believing miners would have us believe. Those who drink the crypto-curremcy kool-aid are clearly operating out of some fervor based entirely on faith, not logic.
That's quite OK, as economics is simply applied mass psychology, more or less, and not a hard science. So one can excuse geeks' lack of understanding of the subject. But to ignore the impolsion of this particular crypto currency at this time is absurd.
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Also, normalcy bias much?
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We developed a complete string of measures to prevent that from happening again. This requires public oversight and a certain amount of state control. However, the whole point of Bitcoin (originally, as proposited by S. Nakamoto) is the cut the state out from the equation, reverting to the previous state. So the question is, what can we do to provide the same amount of safeguard we have now for cryptocurrencies, without changing it's very nature?
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It's sort of like lashing a thousand boats together. The owners of each
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If the Mt. Gox collapse means that there is some fundamental problem with bitcoin, then the MF Global collapse means that there is a fundamental problem with every currency and market on the planet (hint: it doesn't in either case).
Also, nice strawman. OP didn't say anything about stories being made up. The premise of t
Bitcoin has to be BETTER than fiat currency (Score:3)
All this, unfortunately, is irrelevant. Bitcoin in itself has no inherent value. Its only value lies in what its users, and ultimately what the public perceives it to be worth. If I agree to accept 1 bitcoin from you in payme
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>To be widely adopted, bitcoin has to prove that it is better than fiat currency and so far it is doing a terrible job. The failure of the ex-largest exchange, Mt. Gox is the cherry on top.
So, let's see you send some cash from the US to a friend in Asia or Africa faster and cheaper than you could with Bitcoin. Hell, I bought something from the UK a few years back, and it took like a week and cost me almost 10% just to give them my money. Remember, Bitcoin was invented as a decentralized electronic payme
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The relationship is more like gold and a gold exchange. An exchange can collapse, but only the people who trusted the exchange are really effected. The gold is still in vaults, private safes, and in jewelry around the world.
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Where did the money go in the Wall Street crash?
Money on stock exchanges is never lost. For every seller there is always a buyer. For every investment there is a payout. It's like the conservation of energy. Money changes hands, but it can not simply vanish, like BitCoins apparently can, unless you actively destroy cash currency.
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Re: wooo look at that strawman BURNNNNN (Score:4, Insightful)
If you invest 100$ into one share, whoever sold you that share now has your 100$.
If later you need cash and want so sell your share, but its price is only at 10$, it means that there are buyers willing to pay only 10$ for your share.
Subjectively you could argue that you "lost" 90$. But the person who sold you the share for 100$ could now buy it back from you for 10$ and he would have "won" 90$. In total, the balance of the transactions is 110$. No money has vanished. The value of the commodity has changed, and there are winners and losers of the exchange. One mans loss is the other mans win.
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When this happesn with banks operating in fiat especially in USD, then each time every citizen is hurt when tax money "rescues" the bank/banksters who are "too big to fail".
And when USD is printed out of thin air, every user and every holder of USD in the World looses some of USD.
E.g. at some point 1 USD was worth for example 1/100,000,000,000 of entire pool of USDs, after decade it changes to say 1/200,000,000,000 of entire pool of USDs, so if totall mar
Re: wooo look at that strawman BURNNNNN (Score:2, Insightful)
And holding some fixed share oof something is not a good thing. That just means it is easy to manipulate by speculators (also just like gold) in comparison to real currencies in which a stable purchasing power is desired.
As for the "many" geeks turned millionaires, that is hogwash. There were a handful of accidental millionaires, but nobody predicted the heights
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