Bitcoin - P2P currency
decepto

I'm curious, what do you guys think of Bitcoin? My hope is that these type of currencies will allow for more economic freedom.

video

Arthur Kalliokoski

I just hacked up a binary blob that says I have 63.9x10^9 bitcoins. Now I can do a hostile takeover of a major software company and make them behave.

Thomas Fjellstrom

I just hacked up a binary blob that says I have 63.9x10^9 bitcoins.

At least till the network sees that new blob and notices it doesn't match the existing transaction lists. Then they just delete it for being bogus.

Matthew Leverton

Bitcoins sound as worthless as a Canadian dollar.

Thomas Fjellstrom

Bitcoins sound as worthless as a Canadian dollar.

What does that make the US dollar since the CAD is worth more atm than the USD? ;)

Arthur Kalliokoski

Everybody including China and Russia know the US dollar is crap, that's why they don't use it as an international standard anymore.

Trezker

I'd like to know more on the part about mining...

Tobias Dammers

I'm seeing two problems with this.
1 - If there is no central authority to verify your bitcoins, people can (and will) eventually do what Arthur suggested - bypass the 'mining' and hack up their own bitcoins. I don't see how any encryption or secure hashing algorithm could prevent this for a decentralized system. If a standalone application can generate bitcoins, then so can another application, and without external secrets, there is no way to tell the results apart.
2 - A currency is only worth the trust people have in its value. I don't see this happening on a large scale yet, even though the basic monetary mechanisms are nicely modelled after real economies. Which ironically also means that this currency will ultimately have to face the same issue real money does - balancing interest vs. inflation, forgery, etc.; only that bitcoin doesn't have any political power behind it to solve them the hard way.

Thomas Fjellstrom

1 - If there is no central authority to verify your bitcoins, people can (and will) eventually do what Arthur suggested - bypass the 'mining' and hack up their own bitcoins. I don't see how any encryption or secure hashing algorithm could prevent this for a decentralized system. If a standalone application can generate bitcoins, then so can another application, and without external secrets, there is no way to tell the results apart.

The whole idea is that the whole network validates every single transaction. If a new block just magically appears, other nodes won't have seen it, and they'll just reject it later.

Tobias Dammers

I see... but still, given enough malicious users, one could bring it down... hack up a version that validates badly, spread it, and once there are more users with that version, you can circulate just about anything...

Arthur Kalliokoski

And that's why we should still have gold currency, it can be "forged" in microscopic quantities with atomic doodads, but it's far too costly to do so even for that little bit.

Jonatan Hedborg

Currency is useless unless it has a proven value (eg X coins gets you Y kg of steel) - simply wasting CPU time on something does not generate value.

Billybob

I see... but still, given enough malicious users, one could bring it down... hack up a version that validates badly, spread it, and once there are more users with that version, you can circulate just about anything...

The novel approach to Bitcoin is that trust isn't based on number of IPs or number of users, like it is in other P2P systems. "Trust" is based on computing power. The only way to possibly game the system is to have more computing power than the rest of the network. This costs enormous amounts of (real) money to achieve, so it is considered infeasible.

Trezker said:

I'd like to know more on the part about mining...

To put mining in layman terms, it's like running Folding@Home on your computer, and getting money in return for doing so.

In technical terms: Your computer is given a chunk of data. It controls 4 bytes of that data, which it scans from 0 to 0xFFFFFFFF, computing a SHA-256 hash of the new data each time. If the resulting hash is < the current network target hash, you've successfully mined a new block and are rewarded with 50 BTC (+ transaction fees).

This works because the output of SHA-256 is considered random. There is a specific probability associated with a given Target, and a known and predictable amount of computing effort must be expended to compute a SHA-256 hash. Therefore, if someone finds a new block, it is guaranteed that they had to expend, on average, X amount of work to do so.

How to mine: You need a GPU. CPUs just don't cut it. You can try, but ... you won't get far. You also want to join a Mining Pool, which pools the collective computing resources of many users together, giving you your fair share of the rewards. See Deepbit for one example.

Currency is useless unless it has a proven value

You can exchange Bitcoins for real money (seriously. The going rate is about $0.78USD per bitcoin right now. You can get it through PayPal if you want. Instant.).

Jonatan Hedborg
Billybob said:

You can exchange Bitcoins for real money (seriously. The going rate is about $0.78USD per bitcoin right now. You can get it through PayPal if you want. Instant.).

Really? booting up bitcoin generator

Matthew Leverton

The exchange rate will drop fast once spammers start installing bitcoin apps on their zombie networks. :P

X-G
Billybob said:

The only way to possibly game the system is to have more computing power than the rest of the network. This costs enormous amounts of (real) money to achieve, so it is considered infeasible.

Just like spam e-mail networks, right? Wait... oh yeah: e-mail spammers hijack massive numbers of other people's computers through zombie botnets, and there is no reason they couldn't do it here, too. :P

Bob

Econ professor Russ Roberts interviews BitCoin author Gavin Andresen here.

It's a little more tricky to generate a huge amount of bitcoins for yourself.

Trezker

Having your computer crunching number for no good except generating codes to get money seems pretty crappy. A total waste of computing resources that could've been used for crunching that benefits science.

Can't they pay out bitcoins for scientific work units? That'd be a great motivator for people to contribute to distributed computing as you'd get something for it.

Billybob
X-G said:

e-mail spammers hijack massive numbers of other people's computers through zombie botnets, and there is no reason they couldn't do it here, too.

Data for musing over:
Most people doing serious Bitcoin mining use cards like the AMD 5970, which mines at 600Mhash/s. My triple core CPU pumps 8Mhash/s, and my video card pumps 50Mhash/s.

Jonatan Hedborg

My video card (AMD 5870) does like ~70-100 Mhash/s, and my CPU (i7 @ 3.2ghz) does like ... 5 Mhash/s. 600 Mhash/s sounds CRAZY!

But yeah, it seems like a massive waste of computer resources. Also I'm pretty sure whatever "money" you generate will be less than the cost of the electricity used to generate it :/

And as the number of people generating coin increases, the more money everyone will lose (since everyone is competing over a finite resource).

EDIT:
I think I would have to generate 0.0778 bitcoins/hour to break even with the electricity cost. That's 0.026% of the total generated bitcoin (if I understand the system).

Neil Walker

Bitcoins sound as worthless as a Canadian dollar.

Or a health food store in America.

Billybob

Also I'm pretty sure whatever "money" you generate will be less than the cost of the electricity used to generate it :/

Let's do the math!

A 5970 uses 300Watts generating 600Mhash/s. The average obscene cost of electricity here in California is < $0.15USD per Kilowatt-hour.

Total cost per day = 0.3Kwh * 24 hours * $0.15 = $1.08/day
Average time to solve block at 600Mhash/s (as of 2011.04.07) ~ 1 week
50BTC / 7days = 7.14BTC /day
7.14 BTC * $0.78 USD (2011.04.07) = $5.57 USD

Total Profit Per Day: $4.49

Things to consider: Electrical usage of the entire Mining Rig (CPU, mobo, drives, etc); cost of electricity in your area (probably lower); transaction fees (you earn all the transaction fees for processing other people's transactions).

Jonatan Hedborg

You should also take TCO of the computer into account. And the time it takes to generate a block would increase significantly as more people start using the system (since it is - as i understand it - "weighted" to give 50*6 blocks per hour), at least if you don't increase your own output.

What does a 5970 cost anyway?

Trezker

Don't forget that as bitcoin becomes more popular, you'll earn less from mining. And on top of that every four years the payout is cut in half.

Can't they just make it a lottery for who gets the new coins instead of wasting all this power?

Vanneto

"Wasting all this power" - you're saying it like it already isn't wasted. ;D

Jonatan Hedborg
Trezker said:

Can't they just make it a lottery for who gets the new coins instead of wasting all this power?

Not really. Then it wouldn't be decentralized. You are actually creating the money with this system. Which is cool. But wasteful.

Arthur Kalliokoski

Wait, what? Wasted? Don't they do something useful with the computing power? Such as guessing account numbers for real accounts in real banks with real money in them?

gnolam
decepto said:

I'm curious, what do you guys think of Bitcoin?

Neat concept, but utterly useless.

Jonatan Hedborg

My video card (AMD 5870) does like ~70-100 Mhash/s, and my CPU (i7 @ 3.2ghz) does like ... 5 Mhash/s. 600 Mhash/s sounds CRAZY!

heh. My bad. I was running both a CPU worker and a GPU worker at the same time - this reduced the GPU to about 80MH/s, where if I ran it alone it does around 300MH/s.

It's a really interesting piece of technology, but I don't see how it could scale very well and still be distributed. Every peer stores a copy of the whole block chain (as I understand it). This could grow to a very large size I guess, if the system kicks off.

decepto
Trezker said:

Having your computer crunching number for no good except generating codes to get money seems pretty crappy.

Trezker said:

Can't they just make it a lottery for who gets the new coins instead of wasting all this power?

Wait, what? Wasted? Don't they do something useful with the computing power?

http://www.bitcoin.org/sites/default/files/bitcoin.pdf

https://en.bitcoin.it/wiki/FAQ

Arthur Kalliokoski

I still don't see anything that says this mining is put toward anything useful. You might as well pay me for counting integers. Since I'm already in my late youth, I probably wouldn't make it past a billion, and nothing of advantage would be produced. OTOH, if I became an accountant, then I could do something worthwhile for the money.

Thomas Fjellstrom

I still don't see anything that says this mining is put toward anything useful.

The processing that is done is the actual transaction processing for the network. There isn't any dedicated hardware for the transaction processing, the entire p2p network takes care of it. All that processing you're doing when in a bitcoin network is transaction processing, and verifying other node's have processed transactions properly.

That way theres multiple redundancies, so even if someone manages to sneak some fake transactions in, they will be caught fairly quickly, and any transaction using any bitcoins gained, will be invalidated.

bamccaig

I remember hearing about this months ago (maybe the OP also mentioned it then?). I looked into it then, but didn't trust it and eventually just lost interest. I guess I'll give it another shot. :-/ See if I can get the code running. It better not h4x0r me. >:(

Thomas Fjellstrom

I don't think its worth the power use at this point. I only have one GPU that might be able to do a decent job, but Its in the machine that takes the most amount of power, so yeah no.

decepto

I still don't see anything that says this mining is put toward anything useful.

As Thomas said, the computational work done by the miners is needed to create blocks.

There's an arbitrary difficulty factor added to the work. The hash needs to have a certain number of leading 1's in it's binary representation. As the overall computing power of the network increases, the number of leading 1's required increases.

In the grand scheme of commerce and economic utility, the energy cost to create BitCoins is dwarfed by the economic utility it provides.

Also, as Walter would say, "BitCoin is not the issue here, Dude." Napster didn't bring down the record companies. Napster simply ushered in a new era for digital goods. In the same way, BitCoin may not be a panacea for fiat currencies. But I certainly welcome competing electronic currencies which are based on solid mathematical principles.

bamccaig

I don't think its worth the power use at this point. I only have one GPU that might be able to do a decent job, but Its in the machine that takes the most amount of power, so yeah no.

Well, I run my desktop all the time anyway, and I don't actually pay for power. :-/ So I guess it wouldn't hurt to run (e.g., while I'm at j0rb), if it all checks out. :) My GPU is nothing fancy (and the whole PC loves to overheat) so I doubt that shitbox will win any contests... :P If Sony hadn't taken the feature away I would try to build it on my PS3. ;D

Thomas Fjellstrom
bamccaig said:

Well, I run my desktop all the time anyway, and I don't actually pay for power.

I don't run it all the time anymore because I pay for power. Also, just letting cpufreq do its job saves a bit of power, but with bitcoin running, my system would be at 100% and thus not be able to do any cpufreq scaling.

bamccaig

My CPU is already thottled back because of heat... :( Every time the computer starts now Linux (or was it the BIOS? I don't recall...) displays a couple of messages about the CPU being too hot and being throttled. :(

Thomas Fjellstrom

Wow. You need to fix your machine.

decepto
gnolam said:

Neat concept, but utterly useless.

Why do you say that?

AMCerasoli

And what if I want to use others' computers to render my extremely complicated 3D scenes?

Edit: BTW I didn't know that the yen it's also called "more"...

decepto

video

Karadoc ~~

That video doesn't make sense to me. He gives some example of a receipt from a shop owner being used as money, and tries to portray it as being somehow more fair and sound than money from a centralized system; but really, what's to stop that shop owner from giving out these receipts willy-nilly, essentially printing money and being rich for doing nothing? I wouldn't trust that grocer to control the value of my currency. I'd much rather trust the reserve bank.

The guy ends by saying that money you have is more like debt than bounty. Like by having money you somehow own something to someone – well obviously that's not true. Maybe someone owns someone money because I have money, but it isn't me. The money is mine to do what I like with, with no obligations.

Anyway, as for bitcoin... It seems like a good idea, but there are a few things about it that bother me. Firstly, as many have already said, the whole 'mining' business seems like a waste of physical resources – but I'm in two minds about it, because I know that there will be waste like this assciated with any kind of currency. I guess it's just a matter of magnitude.

The second issue in my mind is probably a non-issue; I'm concerned that if everyone has the entire transaction history of their bitcoins, as seems to be implied from what I've read, then this mass of information will one day become impractically large, and thus the system is unsustainable. But surely this is something that has been thought of. It's a pretty obvious problem so I've be surprised if there wasn't a good solution to it already built into the system. I just don't know what that solution is.

Finally, the main thing that stops me from seriously using bitcoin as a currency is that I don't really trust it. With 'normal' currency, I find it easy to understand the system, and understand its weaknesses. I know that currency can be devalued if the central operators decide to bring too much of it into existence, but I trust them - mostly. The thing about this bitcoin system is that instead of trusting people, I would have to trust the system. My main concern is that if bitcoin really does catch on, and everyone is using it as their main currency, and everyone is happy and it's sustainable and useful and fair and everything... but then someone finds a new algorithm which breaks the computational complexity of the mining problem... then the whole currency collapses and we're all screwed.

Bob

Firstly, as many have already said, the whole 'mining' business seems like a waste of physical resources – but I'm in two minds about it, because I know that there will be waste like this assciated with any kind of currency. I guess it's just a matter of magnitude.

Mining is used as a means of generating the initial set of currency.

Think about it this way: Initially, there are no bitcoins. Clearly, that's not an interesting currency if no one has any. So now there's a problem: How do you create the initial set of bitcoins, and how do you do it such that people will trust it and that the distribution is somewhat fair?

With real money, the initial seed started out from commodities with industrial values. But "bitcoins" were never anything real to begin with, or were not traded in another form prior to the invention of bitcoins, so that's not going to work.

The author of bitcoin could have just assigned himself the 21 million bitcoins, and then tried to convince people that they should send him real goods & services for his bitcoins. However, most people will scoff at such a deal, so that's not going to work.

There could have been a lottery, but that would defeat the decentralized nature of the system.

What they came up with is this "mining" system. Is it perfect? No, but it's better than anything I can think of for bootstrapping a new currency.

Quote:

I just don't know what that solution is.

The transaction history isn't the problem (for storage). Instead, storage is done per account. Ie, the system remembers that user "Karadoc ~~" has 23.4251 bitcoins in his wallet.

The transaction history is a problem in terms of network update bandwidth: every node in the system needs to be notified of every transaction. That can get very expensive very quickly.

Quote:

ut then someone finds a new algorithm which breaks the computational complexity of the mining problem... then the whole currency collapses and we're all screwed.

Thankfully, that problem is already solved. All the existing clients accept only 50 bitcoins per 10 minutes worth of new bitcoins generated by mining. For the entire system. Any further bitcoins generated will be rejected as invalid.

So even if you can crack the algorithm, and generate bitcoins infinitely fast, the best you'll enrich yourself is at a rate of 50 bitcoins per 10 minutes.

But more than that: every year the system accepts only half the previous year's mining output. So in 2012, the clients will only accept 25 bitcoins per 10 minutes for the whole system, then 12.5 bitcoins per 10 minutes, and so on, until eventually no mining is possible.

So, to have the system collapse via hyperinflation, you would need to modify virtually every client out there to accept a higher mining throughput. But if you can do that, you might as well just assign yourself everyone's bitcoins and be done with it.

All in all, it's pretty neat. I think I'll give it a whirl with some token change.

Jonatan Hedborg
Bob said:

But more than that: every year the system accepts only half the previous year's mining output. So in 2012, the clients will only accept 25 bitcoins per 10 minutes for the whole system, then 12.5 bitcoins per 10 minutes, and so on, until eventually no mining is possible.

Every four years I think?

And wont the system break down when no mining is possible/worth while? Since it's also what processes transactions and keeps the system running. Though at that point maybe transaction fees will be a better source of income.

Billybob

Though at that point maybe transaction fees will be a better source of income.

Indeed. The assumption is that over time the system will grow, more transactions will occur, and thus the transaction fee bounty will become quite large.

Even if that didn't happen, the system is self-balancing. If it is difficult to profit from mining, less people will do it, leaving more to those that do mine.

And remember, even the official client can mine, so the system will function just fine without professional miners.

Dustin Dettmer

I bought $20 worth of bitcoins. Do you think they're going to deflate? Getting in early could potentially be a good investment....

I'm also generating coins. We'll see how much I get for doing that.
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Apparently you can get money out of the system here:
http://coincard.ndrix.com/

bamccaig

Are you just running the binaries or did you compile yourself? :-/

Dustin Dettmer

Binary. Far too much work to compile something.

Oscar Giner

I bought $20 worth of bitcoins. Do you think they're going to deflate? Getting in early could potentially be a good investment....

The system is already like 1 year old, and the value has been decreasing, so no, it's actually a very bad investment.

As for mining, you should use a GPU miner. It'll take you months/years (depending on what cpu you have) to generate a single block with a CPU miner.

I'd recommend you join a mining pool, unless you have a strong ATI card (nvidia cards are much worse at mining).

Matthew Leverton

Two of the best features of bitcoin that "sold" me to start using it:

  • If you lose your key, you lose all of your money. All banks should operate this way: if you forget your PIN, you lose all of your life savings.


  • If someone steals your key, you lose all of your money. This is no riskier than carrying around all of your money in your wallet, which I hope everybody does. Plus, unlike a traditional theft, the people can hijack your wallet electronically without you even knowing. This is much better than being physically assaulted in a dark alley.

decepto

I know you're being a bit facetious, but security and liberty have an inverse relationship.

m c

bitcoin makers know this, they just want someone, somewhere to believe the superficial claims and honour the currency, then they can effortlessly cheat and live rich.

There is a sucker born every second.

Elverion

I've got a Radeon 6870. According to everything I've seen, this card should get about 240 Mhash/s. I'm only getting ~70 using the tool located here. Am I doing something wrong?

Oh, wait. I found the "problem." I had a Youtube video (although paused) open in a tab. Why would a paused Flash video cause this?

MiquelFire

Flash is using some of the card's resources.

weapon_S
Andresen said:

38:03 Is there infrastructure that has to exist or is it all just sitting on everybody's systems? Just sitting on everybody's systems. You don't have a server in your home town or Satoshi's home town where this is all being stored? No, it's completely distributed at the moment. That will begin to change as we scale up. I don't want to oversell BitCoin. As we scale up there will be bumps along the way. I'm confident of it. Why? For example, as the volume of transactions come up--right now, I can run BitCoin on my personal computer and communicate over my DSL line; and I get every single transaction that's happening everywhere in the world. As we scale up, that won't be possible any more. If there are millions of bitcoin transactions happening every second, that will be a great problem for BitCoin to have--means it is very popular, very trusted--but obviously I won't be able to run it on my own personal computer. It will take dedicated fleets of computers with high-speed network interfaces, and that kind of big iron to actually do all that transaction processing. I'm confident that will happen and that will evolve.

So when it gets popular and trusted, it will revert back to a good old centralized system. Am I the only one who thinks 'Satoshi Nakamoto' might not be so independent?

Thomas Fjellstrom

I think the idea is that anyone could probably start up their own processing centre, since it should still be distributed, but would need large amounts of bandwidth and cpu/gpu time to do the hard work.

NiteHackr

I don't like it.

Money used to have REAL value. You had coins, which were made of metal that had value. Up until 1968 the Canadian quarter and dime were actually made out of silver. Paper money came from banks, basically promisary notes to pay someone money you had in the bank.

Since then we have switched to this stupid confidence game in the value of the dollar and now this?? I'll pass.

I'll use a credit card for online purchases.

I see no use for this what so ever.

Billybob
Neil Roy said:

I see no use for this what so ever.

Micro-payments.

Elverion

Flash is using some of the card's resources.

I can play RIFT, with everything on maximum settings, while standing in the Guardian capitol (Sanctum) and still get over double the Mhash/s as compared to having a single Youtube video paused. Additionally, a Google video (even while playing), or any number of XVIDs playing through VLC have absolutely no effect.

Seems like something is wrong.

bamccaig

I still can't get Bitcoin built. I've given up on resolving the Wxwidgets dependencies for now and am just trying to build the daemon, bitcoind. However, it's looking for some openssl file that isn't installed by Fedora's packages and also isn't installed by openssl's Makefile (I tried installing from source). :-/ #bitcoin told me to edit the Makefile to point to openssl's include directory directly, which seems ridiculous... Why wouldn't it be installed? Sigh... Seems very shifty. All the more reason to not trust the binaries. >:(

Matthew Leverton

If you give me 500 bitcoins, I'll help you out.

bamccaig

Now it's complaining about not finding -lboost_thread-mt. >:( It's right there in /usr/lib: /usr/lib/libboost_thread-mt.so! >:( I think they're trying to statically link... In Linux. >:(

blargmob
Elverion said:

I can play RIFT, with everything on maximum settings, while standing in the Guardian capitol (Sanctum) and still get over double the Mhash/s as compared to having a single Youtube video paused.

Damn you!

I'm on an AMD Phenom II X4 @ 3.4Ghz (will OC sooner or later) and an OC'd GeForce GTX 460 and I can play all the games I have at max settings, except for RIFT.

There is some compatibility issue with the DX9 they used in RIFT with modern hardware and OSs (like Win7). Trion needs to get their shit straight.

Thomas Fjellstrom

I just downloaded and started bitcoin on my server. Works fine.

append: Just for the heck of it I've installed cpuminer and one of the gpu miners, and setup all three of my quadcores to work on bitcoin. I've only got about 34Mhash/s though. Not a whole heck of a lot.

Tobias Dammers
Neil Roy said:

Money used to have REAL value. You had coins, which were made of metal that had value. Up until 1968 the Canadian quarter and dime were actually made out of silver. Paper money came from banks, basically promisary notes to pay someone money you had in the bank.

Not really. Even the Gold Standard didn't guarantee any real-world value; it merely made sure that each dollar was backed with a certain amount of physical gold. Since gold is practically impossible to synthesize, occurs rarely in nature, and is hard (and expensive) to mine, this means that the total amount of dollars in circulation is reliably constant, which in turn, given a stable economy, means that the value of a dollar is going to be relatively stable as well.
But still, the metals money was (and partially still is) made of doesn't have much practical value by itself - you can't eat it, and stuff like gold and silver has limited use in producing tools and machines; and if nobody is around to make food, then all the gold and silver in the world won't buy you a sandwich. The perceived value stems from the fact that these metals are relatively easy to verify (for medieval standards at least), they don't deteriorate over time (like iron would), and they are rare and hard to come by.
Metal money is an abstraction of debt already, and paper money doesn't make any fundamental difference.

Arthur Kalliokoski

paper money doesn't make any fundamental difference.

Could you then explain why things cost nearly 10 times what they did when I was a kid? I remember buying a bowl of chili in a restaurant for 15 cents, Snicker bars for a nickel, and licorice whips etc. for a penny. The only reason I can think of is that the governments counterfeitedprinted 10 times as much money, actually more since the population has risen. The politicians ultimately use this funny money to buy votes.

[EDIT]

I also remember when they started making counterfeit silver coins (dimes and quarters) by using a copper layer in the center circa 1964. Our Weekly Readers (kid newspaper) explained how this "saved precious metals" but I was doubtful about it even then. In 1986 I was shown how US cents aren't solid copper alloy anymore either. That's the only way to allow this funny money to be tied to a fixed resource.

Jonatan Hedborg

The only reason I can think of is that the governments counterfeitedprinted 10 times as much money, actually more since the population has risen

Well they don't actually "print" the money, but put out loans. And it's called inflation. It's pretty much how our current economy works (and I use "works" in the loosest sense possible).

Thomas Fjellstrom

I also remember when they started making counterfeit silver coins (dimes and quarters) by using a copper layer in the center circa 1964.

Canadian Pennies haven't been pure copper since about 97 or so. After that they started copper plating zinc, then moved on to steel sandwiched between copper plated nickle. Theres less than 1% copper in our pennies these days.

Most of the silver coins are also made out of steel these days instead of nickle (they were all made out of nickle for as long as I can remember, even the dime, quarter and obviously nickle).

Dustin Dettmer

Government money is always cheating. Originally they stamped coins to tell you how pure it was and eventually how much it weighed. Once trust set in the sovereignties could make the coins less and less pure and weigh less and less (which of-course they did). At the end of the Romain empire their coin was down to 1/24th the promised purity.

But, even with this problem, it's still better then trading cattle. I think that's why everyone still does it.

Arthur Kalliokoski

Actually the coins meant for daily circulation were never made of the pure metal, they'd wear out way too quickly. You could probably bend them with your fingers. OTOH, it'd be a fun way to troll a politician at a rally, if he promises to fix the economy, ask him when they'll "make the coins right again". Of course you'd quickly be removed from the scene.

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Billybob

I bought $20 worth of bitcoins. Do you think they're going to deflate?

Well, much to my surprise, the markets jumped back up towards $0.90USD these past two days. So I guess you just made some money!

NiteHackr

Most of the silver coins are also made out of steel these days instead of nickle (they were all made out of nickle for as long as I can remember, even the dime, quarter and obviously nickle).

Canadian dimes and quarters were pure silver up until 1967. Then in 1968 they were only partially silver and then nickle after that. I used to look for silver dimes and quarters 1967 or earlier and sell them for quite a bit when the price of silver was really high. You could make quite a bit selling these to people who then melted them down. Probably not as many of them around from that era any more due to all that got melted down. That's why the Nickle was always larger than the dime, yet worth less, because the dime used to be pure silver.

Edit: Here's a history of Canadian silver coins (about 80% silver up until 1967)

Canadian Silver Coins 1858-1968

Jonatan Hedborg
Billybob said:

So I guess you just made some money!

Only if he actually sells them ;)

Karadoc ~~

I've got the bitcoin client running now. After letting it sit for quite some time, it has downloaded 107,000 blocks. According to this site the current total is 118287 blocks. So apparently I've almost downloaded enough blocks to actually start using it.

The thing is, relatively recently there were far few blocks: "As of October 30th 2009, there are about 26000 blocks." If it already takes ages to download all this junk, and it's going to grow much bigger, then this system is really going to be pain to use.

(while typing this, my download has stalled somewhat. It's still at roughly 107k.)

bamccaig

I've got the bitcoin client running now. After letting it sit for quite some time, it has downloaded 107,000 blocks. According to this site the current total is 118287 blocks. So apparently I've almost downloaded enough blocks to actually start using it.

The thing is, relatively recently there were far few blocks: "As of October 30th 2009, there are about 26000 blocks." If it already takes ages to download all this junk, and it's going to grow much bigger, then this system is really going to be pain to use.

(while typing this, my download has stalled somewhat. It's still at roughly 107k.)

I don't think the mining is actually the way you're supposed to get bitcoins for practical use though. You would get bitcoins the same way you get dollars or euros: either from work, business, or by buying them with existing currency. I consider the mining as more or less a controlled way to "mint" the bitcoins. Participating in mining is optional though, AFAIK. It's a possible way to contribute and maybe even make a little bit of money in the process, depending on the speed and consumption of your computer.

NiteHackr

This is funny, bitcoins are starting to look like some sort of pyramid scheme, everyone is running these miners but nobody is actually spending them. ;)

Edgar Reynaldo

I just wonder who the fool(s) is(are) that originally gave bitcoins value by backing them up with real money. I mean, who pays for useless cpu/gpu consumption anyway?

"A fool and his money are soon parted."

Dustin Dettmer

They're also backed with real services:
https://en.bitcoin.it/wiki/Trade

I count probably around a 100 on that page.

Edgar Reynaldo

Right, but somebody had to give bitcoins actual value by backing them up with money or goods, and everyone who did that essentially gave away their money.

Matthew Leverton

The fools aren't the ones who were first to buy ... they are the ones who are last to buy.

Jonatan Hedborg

Right, but somebody had to give bitcoins actual value by backing them up with money or goods, and everyone who did that essentially gave away their money.

Some people would call it a risky investment ;)

I imagine it started with people trading work-time and things like steam games (buying as a gift to someone) on the bitcoin forum. Money is always a matter of trust.

Edgar Reynaldo

Maybe what I said earlier was wrong. I guess a bitcoin is like a share of a stock. Someone initially said something along the lines of "I have 10000 bitcoins, and I will sell them for a dollar each," and so they made $10000 for nothing (because the earliest blocks were much easier to make). But the difference between a bitcoin and a stock share is that you don't really own anything with a bitcoin unless other people are willing to pay you for them.

Is there a graph somewhere of the value of a bitcoin versus time? That might be interesting to see, especially whether they are being devalued as more blocks are discovered.

bamccaig

It's really no different than two people deciding to trade work for beer... The only difference is that the bitcoins weren't purchased, but generated. However, they were generated over a long period of time at the expense of power and clock cycles, and limited in number, to prevent them being devalued by inflation. All it really takes to give something value is for two or more parties to agree to consider them valuable; therefore, they are willing to offer goods or services in exchange for that thing.

But the difference between a bitcoin and a stock share is that you don't really own anything with a bitcoin unless other people are willing to pay you for them.

How is that any different from a stock?

Elverion

There's a graph on Mt Gox. https://mtgox.com/trade/history

Edgar Reynaldo
bamccaig said:

How is that any different from a stock?

The difference is that if you own a stock share, you own a portion of the company. If you own a bitcoin, you only own what people are willing to give you for it. Of course with a stock you can only get what people are willing to pay you for it as well, but at least you own something tangible instead of something that is made up.

bamccaig

The difference is that if you own a stock share, you own a portion of the company. If you own a bitcoin, you only own what people are willing to give you for it. Of course with a stock you can only get what people are willing to pay you for it as well, but at least you own something tangible instead of something that is made up.

AFAIK, a stock is more or less a pretend stake in the company. The value comes from your ability to sell it (and to some extent, maybe having a say in how the company operates, but the majority of votes always seem to be owned by the monopoly guy anyway). The stock is only valuable because other people consider it valuable; presumably rich people that want a say in how the company operates, and smaller fish trying to make money off of those rich people competing for a bigger say.

Matthew Leverton

instead of something that is made up

All money is made up. Assuming it is not possible to game the system, a bitcoin is as sound as any modern currency. The $100,000 you keep in your sock drawer as USD could be worth nothing tomorrow.

Edgar Reynaldo

All money is made up.

Sure, but not all value is. If you own stock, you own a stake in buildings, equipment, inventory, customer base, so on... If you own a bitcoin, well, good for you.

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If you had bought in by October of last year, you could have made 10x your money back in February. I wonder what precipitated the large jump in perceived value over the last quarter and a half?

NiteHackr

A bitcoin is a form of currency, or they're trying to be one anyhow. It is not stock. Period.

Edit: Here, educate yourselves: How Stocks and the Stock Market Work

Edit2: To summarize, if you own a share in a company, you own a percantage of that company, something tangible. So long as you own the shares, you get a percentage of that companies profits. If the company earns $7,500,000 and there are 10 shares, each share will get $7,500, paid out yearly.

A bitcoin is only worth anything as currency if people are willing to trade goods in exchange for these. If someone offers me bitcoins for anything I wish to sell, I'll tell 'em where to shove 'em. ;)

Arthur Kalliokoski

video

[EDIT]

"A fool and his money are soon parted."

A fool and his money are soon partying.
FTFY

Billybob

For people concerned about disk-space and bandwidth usage, here is a passage from Satoshi's paper:

Quote:

Once the latest transaction in a coin is buried under enough blocks, the spent transactions before
it can be discarded to save disk space. To facilitate this without breaking the block's hash,
transactions are hashed in a Merkle Tree [7][2][5], with only the root included in the block's hash.
Old blocks can then be compacted by stubbing off branches of the tree. The interior hashes do
not need to be stored.

A block header with no transactions would be about 80 bytes. If we suppose blocks are
generated every 10 minutes, 80 bytes * 6 * 24 * 365 = 4.2MB per year. With computer systems
typically selling with 2GB of RAM as of 2008, and Moore's Law predicting current growth of
1.2GB per year, storage should not be a problem even if the block headers must be kept in
memory.

Another interesting quote:

Quote:

The incentive may help encourage nodes to stay honest. If a greedy attacker is able to
assemble more CPU power than all the honest nodes, he would have to choose between using it
to defraud people by stealing back his payments, or using it to generate new coins. He ought to
find it more profitable to play by the rules, such rules that favour him with more new coins than
everyone else combined, than to undermine the system and the validity of his own wealth.

weapon_S

That last quote is indeed interesting. I think it is a very smart principle.
But reading the white paper[1] I get the feeling that in theory all transaction data could be distributed, inevitably creating 'orphans' (for certain transactions are not known to some part of the system), but in practical ideal situations ALL transaction history (albeit compressed) exist on ALL nodes.
I can picture this leading to some inefficiencies, which would be fixed by either building a large verification-dedicated network of probably one owner (which de facto would create a centralized system[2]); or more blatantly 'fixing' the problem by refactoring into a centralizzed system; keeping the stories about a "free alternative form of currency".

References

  1. I think it was; I recognize the quotes.
  2. Correct me if I'm wrong. I don't exactly understand the verification system, but if a large network would 'outsource' primarily to its own nodes and plays by the rules, it would become an 'indisputable authority'; even though it's verified by nodes outside this 'monopoly-network'. Normal nodes wouldn't have data on as much transactions as the 'monopoly-network'
Dustin Dettmer

I just wonder who the fool(s) is(are) that originally gave bitcoins value by backing them up with real money. I mean, who pays for useless cpu/gpu consumption anyway?

Maybe people who are tired of paying for useless paper bill manufacture by the state.

Arthur Kalliokoski

The University of Texas just bought nearly 1.0x10^9 US dollars worth of gold bullion, quite possibly prompting other money managers to do the same. TFA states that there's 100 times as much "money" as there is gold in the world.

http://www.zerohedge.com/article/golden-tipping-point-university-texas-takes-delivery-1-billion-physical-gold

The shit's gonna hit the fan now.

Billybob

For those interested in how Bitcoin handles bugs in its code, this was a revealing incident in its recent past:

Strange block 74638

In summary:

Someone found an overflow bug in the code and used it to give themselves 184 billion BTC. The client was patched, the block chain forked, and eventually the "good" block chain overtook the bad one. That transaction, becoming invalid, was erased and most other valid transactions were incorporated into the good block chain.

Dustin Dettmer

:o
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weapon_S

Nice short term investment, Dustin! :D

NiteHackr

Well, if the price of gold is anu indication, you may soon find that bitcoins will soar in value as the US dollar collapses. People exchange their soon to be worthless cash for gold for a reason. ;)

Thomas Fjellstrom
Neil Roy said:

People exchange their soon to be worthless cash for gold for a reason.

Gold currently has a similar problem. Its value is artificially inflated, and they don't actually have the amount of gold they've "sold" to people. Good luck collecting. If you have gold certificates, you're going to want to make sure you get them to give you the actual gold at some point, or your certificates will become more worthless than the currency you used to buy it.

Arthur Kalliokoski
Jonatan Hedborg
Quote:

You could have hundreds or thousands of dollars in your account by the time we launch, without ever making a deposit!

You should never question free money. ::):-X

NiteHackr

Gold currently has a similar problem. Its value is artificially inflated, and they don't actually have the amount of gold they've "sold" to people. Good luck collecting. If you have gold certificates, you're going to want to make sure you get them to give you the actual gold at some point, or your certificates will become more worthless than the currency you used to buy it.

That's a good point. I never thought of it that way. I wonder if Texas University actually has the $1billion in gold they purchased?

I also thought that in a worldwide economic crash, how much would gold be worth if nobody can afford to buy it? But it's all that people have to protect their investments, I think many will find when a crash occurs that they will be just as broke with their "gold" as with actual cash.

if you believe in bible prophecy, it states that people will throw their gold into the streets, indicating that it will be just as worthless. Time will tell.

Arthur Kalliokoski
Neil Roy said:

I think many will find when a crash occurs that they will be just as broke with their "gold" as with actual cash.

They can trade it with goods and services, as always, because the people who get it will expect to be able to trade it etc. I sure would.

Billybob

I bought an AMD 5850 video card for $150USD shipped. With 24/7 mining, my calculations show that it will be paid off by the end of next month, including paying for electricity. This will be an interesting experiment ...

NiteHackr
Quote:

You should never question free money. ::):-X

Unless of course, it isn't real money. And this isn't real money, it's no different than a score on a video game, you get a higher score for getting more people to join the service, you get points on a daily basis that varies. No actual real world currency is changing hands, I can't turn in these virtual points (they call $ but...) for real world money or goods, only digital goods so, it doesn't look like a good idea to me. BUT, I signed up anyhow... just in case. :P

Edit:

After reading all the terms of agreement on that VirtaPay site, two items bothered me:

1. We reserve the right to refuse service to anyone for any reason at any time.

8. You must not post obscene material. Doing so is grounds for immediate account termination.

So you built up a lot of VirtaPay cash and suddenly, just for fun, your service gets terminated and you lose it all... you can't do anything about it. Also, I am curious what they define as "obscene", different cultures have different ideas on what is obscene and what is art... what if you posted something you thought was decent, they decide it is obscene and poof, your account is closed, all cash is lost, no legal remedy.

I think I changed my mind, I'll close my account there.

Thomas Fjellstrom
Neil Roy said:

, I can't turn in these virtual points (they call $ but...) for real world money or goods

Last I checked you can. There are exchanges that will turn BtCs into cash.

Vanneto

Neil: I do hope you know Jonatan was being sarcastic. :P I'm even more amazed you opened an account there. Don't feel bad tho, a lot of people (including me) would stop having money if people would stop being naive. ;D

But reading the ToS, smart move. If only more people did that then there'd be a lot less scams in this world.

Billybob

Last I checked you can. There are exchanges that will turn BtCs into cash.

He was talking about VistaPay, not Bitcoins.

NiteHackr

With regard to VirtaPay, I wasn't naive, just curious about what it was they were offering. Signing up didn't cost me anything so I signed up just to see what they had. Their terms of service agreement is a total scam, and one would be a fool to use that as a service without any legal remedies or methods to convert their "cash" into real money. It's basically just a sophisticated video game in my opinion. If you wish to buy something online, stick to credit cards, at least if you have a dispute over a charge, you can call the credit card company and have it removed. These online currencies are a total scam and far too risky in my opinion, there really isn't ANY reason that I have seen to use them, other than for the sheer novelty of it all.

Something like PayPal is good for this (although I don't like some of how they operate, like their minimum withdraw amount, I got some money donated to me for one of my games and I can't withdraw it because that's all I have in the paypal account and it's below their withdraw limit, so someone basically just got done donating to PayPal for my game, not me. I definitely have to find a better service for this type of thing.

weapon_S

I think you've just nicely summed up all the problems Bitcoins circumvent, with paypal as a (bad) example.

NiteHackr

Nah, I'll just use a credit card for such things if needed. I just made certain I have a card with a low limit and I keep the card's balance paid off so I pay no interest. With a credit card I can better protect myself from fraud as well and my account won't suddenly just vanish one day with all my "money" I had in it.

I am even considering getting rid of my credit card entirely and not bothering at all with online purchases. But that probably won't happen. ;D

gnolam
Jakub Wasilewski

I find the whole forum conversation over at bitcoin.org hilarious.

Long story short: Paypal cut its support for a guy exchanging BitCoins to USD and back. The reason? Basically, Paypal has policies against people doing e-currency with their service, which is pretty undestandable considering the line of business they are in.

Whether you agree with their rationale or not (and PayPal really is evil, I know), those responses are insane:

Quote:

Mndrix, in the end of the day the bastards shut you down for POLITICAL reasons.

Quote:

They are scared. It means we are winning.
I hope it goes well for you mndrix.

Quote:

"First they ignore you, then they laugh at you, then they fight you, then you win." - Mahatma Ghandi
Eventually PayPal will support BTC as a currency, just like they support USD or EUR. Then we win.

Quote:

So it begins, the first shot is fired in the bitcoin wars.

Delusions of grandeur, anyone? It sounds as if some people there consider themselves martyrs already. (There were some sane voices too, I just picked the silliest posts).

I wonder how this debacle will influence the value of a BTC. Reason dictates that the value should fall severely as trust into it being easily exchangeable to USD disappears. Edit: or not. It seems there are some other ways of exchanging the currency. Still, there should be a discernible fall, I think.

Vanneto

@BillyBob: you are surely joining a mining pool, right?

Dustin Dettmer

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???

Matthew Leverton

And now Dustin's last $20 is tied up in a system that has been destroyed. :'(

weapon_S

After reading the freebie motherboard thread, I just realized that Bitcoin-mining in theory might give incentive to build quantum computers/not take in account the advent of quantum computers. I personally don't believe I will ever see a quantum computer in my life-time, but wouldn't it be funny, if I were wrong?

Dustin Dettmer

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What's going on? Should I sell or wait? ???

So far I've turned my $40 into $170.

New news! You can order bit bills now!
http://bitbills.com/index.html

Edgar Reynaldo

Looks like a local peak at least. I would sell mine if I had any.

Karadoc ~~

What's going on? Should I sell or wait?
So far I've turned my $40 into $170.

I'm quite surprised that they've gone up at all. I expected that the price would be flat, or in slow decline as people mine bitcoins to sell them for conventional currency. So base on that I'd say sell and be happy – but what would I know? Not much, apparently.

Again, I find that increase astounding. Not only has the value gone up, it's gone up heaps, and I don't really understand why.

weapon_S

What's going on? Should I sell or wait?

Sell half of the Bitcoins; still make absolute profit :o Nice going Dustin :)
The mining is (apparently) ridiculously restricted compared to the demand of an emerging currency. I think this shows that it might not have been the best to make it is impossible to "print more" when necessary.

Michael Jensen

Alright, figured I had to stop in and see what was going on in this thread finally.

First off: pages 1-2 all about "You can't make money mining Bitcoins, or can you?" -- that's not the point of Bitcoin, that's just how the inflation process works; inflation makes you POORER over time not richer. That's to handle increased usage over time, and more people having Bitcoin wallets... Also, eventually when the system hits max inflation (and there is a defined max) Bitcoins can be subdivided into decimal quantities.

In the end you make money on Bitcoin the same way you would any other currency, you trade for it, you work for it, or you cheat for it.

Second off: For anyone citing technical issues -- the people who designed and built Bitcoin had everything mentioned in this thread (just about) figured out before they wrote a single line of code, they understand cryptography and scalability better than you, these problems have already been solved, so deal with it.

Third off: for people citing that it isn't real money: There is no such thing as real money. It's all a number in a computer somewhere, and is only EVER worth what people are willing to give you in exchange for it. The same thing my nintendo or computer is worth. Just because I can trade my nintendo for more cows now than I could before doesn't mean the value of my nintendo went up, maybe it means the value of cows went down, or even that the value of my nintendo went down but the values of cows went so far down that it offset that... or any other feasible combination of the two.

US dollars are not the only monetary system used in the US. Several cities have localized currencies. Usually when the currency gets too strong the fed steps in and breaks it up. Bit coin does not suffer this issue as it is decentralized.

Bit coin DOES, however, have a stability issue which is caused by it not being widely accepted, and not being backed by another currency with an established value (such as gold or silver), however as more people begin to adopt it and use it it may begin to stabilize more. At any rate, even if the value just stays the same, the relative value (in US dollars) will go up as the US dollar plummets.

This is no different from investing your money in another stable currency on the Forex exchange (In idiot's terms Forex is like a stock market for trading money. Someone else may be able to explain it better, but a lot of the confusion in this thread would disappear if people just understood the above.)

Trezker said:

Can't they pay out bitcoins for scientific work units? That'd be a great motivator for people to contribute to distributed computing as you'd get something for it.

The EFF takes Bitcoins as payment, so you can help them out if you like.

I'd much rather trust the reserve bank.

+1 vote for stupidest statement ever.

Neil Roy said:

I see no use for this what so ever.

You just said you hate the con-game the banks play on us, yet switching to a currency they don't control is unappealing to you?

The thing about this bitcoin system is that instead of trusting people, I would have to trust the system.

Exactly.

Could you then explain why things cost nearly 10 times what they did when I was a kid?

It's called inflation. Like in monopoly when you pass go. More money enters into the system for some arbitrary reason that benefits no one except for those who made up the arbitrary conditions. What Bitcoin has is much more fair.

In monopoly, if we always had the same money as we did at the start it would be hard to bankrupt anybody and take all their stuff while they rot in debtors prison; also the system would be way too fair.

This is the problem people have solved with inflation, because people don't like fair. People like unfair advantages (blame evolution, for people's desire to get ahead unfairly.) So they fuck with the system and gain a deep understanding of how it works, and exploit it, and their fuckings with it, to become very rich. They're called bankers and brokers and financial tycoons, and criminals in suits.

Quote:

The politicians ultimately use this funny money to buy votes.

The corporations that buy politicians you mean.

I bought $20 worth of bitcoins. Do you think they're going to deflate?

Bitcoin currency is constantly inflating; but that doesn't mean you can't trade it for more than you paid for... But why Bitcoin and not Forex or some money market -- that is, if you just wanted to trade? [edit: after reading the whole thread, wow, good job Dustin!]

Right, but somebody had to give bitcoins actual value by backing them up with money or goods, and everyone who did that essentially gave away their money.

Which was worthless money anyway. Money is just an idea, a number in a computer somewhere anyway. It's not really "backed" with anything. It never was. Just what people were willing to back it with.

In the US they say it's backed with gold, but when the world called in their debts, Nixon gave half our gold away, then gave them all the finger, and shut the doors on that real quick.

Let me say it again: Your money is not really worth anything. It has no REAL value. ALL MONEY regardless of the currency type, etc, is worth EXACTLY what people decide it's worth. I give away 40 hours a week of my work (sometimes more) for currency that is constantly losing value that barely pays my rent and feeds me. My work that I trade is a type of currency too! -- Would it matter if they paid me in star trek action figures? Not if sellers were willing to take them as payment -- at that point in the example star trek action figures become legitimate money.

If you own a bitcoin, you only own what people are willing to give you for it.

You mean like stocks on Forex? Again, not all stocks are in companies...

Quote:

Of course with a stock you can only get what people are willing to pay you for it as well, but at least you own something tangible instead of something that is made up.

Um, it sounds like you have no idea how the stock market works. NOTHING on the stock market is tangible. Not in futures/commodities/securities (unless you're doing it wrong), not in Forex, not in bonds, and certainly not in any of the traditional exchanges that you're talking about like NYSE or NASDAQ, etc...

Neil Roy said:

you own a percantage of that company, something tangible.

How is a made up entity worth something OTHER than what people decided it was worth? Again, it's ALL made up. It's not real.

Quote:

A bitcoin is only worth anything as currency if people are willing to trade goods in exchange for these.

So, exactly like regular currency then...

If you have gold certificates, you're going to want to make sure you get them to give you the actual gold at some point, or your certificates will become more worthless than the currency you used to buy it.

Thomas, is that true for all gold trading systems? What about pecunix, for example? -- I'm not really interested in buying gold, but thinking about silver, it's cheaper and seems to be growing faster in value (anyway, the service I found doesn't sell you paper, they actually ship you the metal you buy... but even then I'm not convinced it would be worth anything when I needed it.)

Neil Roy said:

I think many will find when a crash occurs that they will be just as broke with their "gold" as with actual cash.

Right? Who wants to buy gold when they can buy FOOD or AMMUNITION or OIL... especially a piece of paper that represents gold on a market that may not even exist at that point...?

Quote:

if you believe in bible prophecy, it states that people will throw their gold into the streets, indicating that it will be just as worthless. Time will tell.

That happens all the time in history. It's called famine. Money isn't real. You can't eat it, it's just an idea. It's only worth what people are willing to give for it. Bitcoins are no different.

Again, I find that increase astounding. Not only has the value gone up, it's gone up heaps, and I don't really understand why.

Because the perceived value has changed, usually this is a result of supply & demand. Perhaps in the last few days someone has tried to buy a lot of Bitcoin? Or perhaps in the last few days our currency inflated dramatically...

Neil Roy said:

Unless of course, it isn't real money.

It never is. Work is all you have. What you're willing to trade for yours is up to you and whom you're trading with. ;D

Karadoc ~~

Second off: For anyone citing technical issues -- the people who designed and built bitcoin had everything mentioned in this thread (just about) figured out before they wrote a single line of code, they understand cryptography and scalability better than you, these problems have already been solved, so deal with it.

Quote:

I'd much rather trust the reserve bank.

+1 vote for stupidest statement ever.

My point was that for a currency like this to gain traction, it isn't enough to just say it works. The general public needs to be convinced that it works, and is safe, and stable, and reliable. I think the system sounds pretty good, and I'd be surprised of the inventors hasn't thought of all the technical problems that we've mentioned here. But saying "they've thought of it, and they know more than you" is just not enough of a guarantee for me to start trusting this system with the bulk of my money. I'm not even vaguely close to considering moving all of my savings into bitcoins — because I have far more trust in the currency that I'm already using (AUD). Do you really think I'm stupid for saying this?

Because the perceived value has changed, usually this is a result of supply & demand. Perhaps in the last few days someone has tried to buy a lot of bitcoin? Or perhaps in the last few days our currency inflated dramatically...

I see. So the value went up because the value changed. Thanks. Stupid people like me need that kind of explanation.

Michael Jensen

But saying "they've thought of it, and they know more than you" is just not enough of a guarantee for me to start trusting this system with the bulk of my money.

Because of security? That seems dumb. It's about as secure as it's going to get; and when they find bugs, because it's open source, they'll get fixed. If you're going to put something that could become compromised like this, open source wins out for security. Just look at the compromised voting system -- I trust open source waaaay more than closed source for something like this!

video

However, stability is another issue. I speculate that NOBODY is putting "the bulk of their money" into this system, and that's mostly because of stability issues (the value of the money in this system is not as "guaranteed" or in "wide spread" usage.

I wouldn't put any bulk of money in this system -- but it may be fun to set up an account anyway and play with it until it gains traction -- it won't go from 0%-100% over night, but maybe over the next 10 years it will become stable) -- there may be a tiny segment of people who don't understand how it works and thinks it's insecure, but those are the same people who think the economy and banks are black magic.

Anyway, if there is a security hole found, fix it, it's open source. Someone might exploit it for a bit (as a link was shown above -- but that exploit was never discussed here as an original idea or brought up before the link was posted -- and the system recovered well because the open source community found the issue and fixed it.)

Quote:

I'm not even vaguely close to considering moving all of my savings into bitcoins

Again, I wouldn't either. But the second reason you quote is a different reason: "because I have far more trust in the currency that I'm already using (AUD)." -- it sounds like stability is your real concern too, and not security.

As I mentioned earlier, Bitcoin lacks stability. -- I suppose in the context of Bitcoin (or any infant currency without any backing) versus an existing and established reserve bank, the reserve bank will win (sadly), but I still do not trust OUR reserve bank at all. AUD maaaaaaay be different from the US, but it's pretty bad in the US.

The Federal Reserve (our central bank) isn't even a government institution [despite the name -- and unless you count that they aren't taxed... -- at least according to the supreme court in a decision made literally one year before I was born, to the day. Holy shit. Clearly I was sent here on a mission... 8-)::);)]

That statement remind me of this video -- Worth Watching: haha ;)

video

I think it's probably tea-party propaganda, but if you can get past that, there is some humor and educational value in it. ;)

Quote:

I see. So the value went up because the value changed. Thanks. Stupid people like me need that kind of explanation.

Well, yeah, that's how all prices in all currency exchanges change. Traders live and breathe this stuff, and most of the time they don't even care why, just that it happened -- sometimes nothing but trader speculation is what drives a price up (like with oil...) -- Anyway, I was thinking about putting some money into this back in January, not for trading, but just... yeah... fuck. Wish I'd done that! ;)

Billybob

they understand cryptography and scalability better than you, these problems have already been solved, so deal with it.

Thank you for bringing this topic up, because although your specific statement is false (probably through no fault of your own), it's a great opportunity to discuss something very important.

No system is ever so well designed as to be irreproachable.

We all possess the intellectual capacity to both understand the Bitcoin system and improve upon it.

The spirit of Bitcoin is one of openness and community. Everyone, from every walk of life, is free to dissect it, discuss it, and change it.

Oscar Giner

It has sky rocketing today :o

{"name":"chart.png","src":"\/\/djungxnpq2nug.cloudfront.net\/image\/cache\/8\/f\/8fab69fae724ed3cc19a1ab7c8267b72.png","w":400,"h":348,"tn":"\/\/djungxnpq2nug.cloudfront.net\/image\/cache\/8\/f\/8fab69fae724ed3cc19a1ab7c8267b72"}chart.png

So today it went from 3.8$ each BCoin to 4.7$ each BCoin, and the day hasn't ended yet :o:o.

Dustin Dettmer

There is about $200M USD in the bitcoin system total right now.

Thomas Fjellstrom

Feh. I was going to see about trying my luck, but they only seem to support payment services that require you to either send a check/money-order in to "load" your account, or do an EFT, which takes days. And I'd rather not give them my bank info.

Neil Black

A friend of mine uses bitcoin. He apparently missed out on a few thousand dollars worth by selling when they were steady at around .6 for a few months... and is rage-facing now that they're at 4-5.

Billybob

I was going to see about trying my luck, but they only seem to support payment services that require you to either send a check/money-order in to "load" your account, or do an EFT, which takes days.

There are alternatives, like bitcoin-otc. Bitcoin-otc (Over The Counter) lets you trade directly with other people. A Web of Trust is used to improve security, along with escrow services like ClearCoin.

So you can try to use that to buy with something like PayPal.

You can also look into buying LR, Liberty Reserve bucks, using a Credit Card or something. Then transfer the LR into Mt. Gox.

Yeah, it's all a bit of a pain at the moment since CoinPal went down. :(

EDIT: By the way, TF, if you only want a small amount of BTC (<50), and are willing to cover PayPal fees, I'll sell them to you. Just PM me. I need to pay off my graphics card :P

Karadoc ~~

Because of security? That seems dumb. It's about as secure as it's going to get; and when they find bugs, because it's open source, they'll get fixed. If you're going to put something that could become compromised like this, open source wins out for security. Just look at the compromised voting system -- I trust open source waaaay more than closed source for something like this!

However, stability is another issue. I speculate that NOBODY is putting "the bulk of their money" into this system, and that's mostly because of stability issues (the value of the money in this system is not as "guaranteed" or in "wide spread" usage.

Because it's open source, bugs are likely to be found and fixed as you say. That's good, but is it good enough? What if there is a fundamental flaw which results in the whole system being compromised such that no transactions can be trusted? Such a flaw is extremely unlikely, but it would also be extremely bad. Meanwhile, in the conventional currency "security" of that kind of basically provided by anti-counterfeit measures on printed currency, and various security systems implemented by banks for electronic currency. It certainly isn't perfect. It fact, in the anti-counterfeit measures on US currency are very weak (compared to Australian currency, which has very strong anti-counterfeit technology). But the fact is that conventional currency is more tested, better understood, and perhaps more able to evolve to new security systems (I don't really really know what mechanisms are in place for bitcoins to implement new security checks).

But all that's really beside the point. You're right that stability is the bigger concern. You originally called me stupid for saying that I trusted the reserve bank (of Australia) more than I trust the bincoin system. Well the reserve bank basically has nothing to do with the kinds of security that we've been talking about. The job of the reserve bank is to keep the currency stable. So when I say that I trust the reserve bank, and that I'm not willing to transfer my wealth into bitcoins, what I'm saying is that I think my money is safer in conventional currency than in bitcoins. I'm not necessarily talking about it being stole by some security loophole; but rather talking about loss of value in general.

I'm not saying that I think bincoin is a doomed or flawed system. I'm not saying that I'll never use it or that I'll never trust it. I'm just saying that I don't trust it yet – which surely isn't surprising, since I only learn of its existence recently; and I've been using conventional currency my entire life.

Billybob

I don't really really know what mechanisms are in place for bitcoins to implement new security checks

Bitcoin operates as basically a consensus system. So whatever the majority of clients agree upon is the canonical "correct" state of the system. If a security flaw is discovered (there have been; look back a few pages for a post of mine), the client gets patched, and eventually the system corrects itself [1]. All transactions based on the exploit are invalidated and useless.

So, basically, if a terrible exploit is discovered somewhere down the road when Bitcoin is in use by thousands of banks and millions of people, there will be about a day of downtime. All valid transactions will remain valid, all the "stolen" money will be recovered, and all will be right in the world. I can't imagine any conventional currency and banking system would be able to repair, update, and recover all their money in the same amount of time.

[1]

To be specific. Anyone who updates their client immediately will no longer see the exploited transactions. They won't exist according to your client, and you won't see any transactions based off of those transactions.

Anyone who doesn't update will have to wait until the "correct" block chain beats out the incorrect block chain. This is accomplished when the hashing power of the miners working on the new block chain outpaces those working on the old block chain (roughly). Since most of the current hashing power is centralized to a few mining pools, this can happen pretty fast.

So, in the future, if you read about a Bitcoin exploit and are worried about the money your friend sent you, just update your client.

And, to be clear, the only transactions that get invalidated are those based off of the exploited transactions, and those based off of bitcoins mined after the exploit occurred. So you are very much unlikely to experience any difficulty and probably wouldn't even notice when an event like this occurs.

BAF
Billybob said:

And, to be clear, the only transactions that get invalidated are those based off of the exploited transactions, and those based off of bitcoins mined after the exploit occurred. So you are very much unlikely to experience any difficulty and probably wouldn't even notice when an event like this occurs.

Unless the exploit isn't discovered for quite a while. Then, quite a bit may be depending on that fraudulent transaction.

Thomas Fjellstrom
Billybob said:

EDIT: By the way, TF, if you only want a small amount of BTC (<50), and are willing to cover PayPal fees, I'll sell them to you. Just PM me. I need to pay off my graphics card

I was thinking about buying $100 worth. Whatever that is in BTC. Preferably like to buy in at a somewhat lower point than the peak today... Can you give me a deal on em? ;)

Dustin Dettmer

What's to stop an update from invalidating a random transaction that the development community just doesn't like?

bamccaig

I went ahead and installed the Windows client via installer (now that I'm back in Windows with my new PC for gaming). I left it running for a couple of hours, "generating" bitcoins, but saw no sign that anything was happening (aside from all 6 of my CPU cores maxing out). :-X I decided that the life of my CPU is more important to me than "mining" an experimental form of currency. :P I might want to buy into it (nothing major; maybe ~USD$5 or something to start), but I'm not willing to go to any trouble to do so. :)

Thomas Fjellstrom

A CPU just isn't fast enough to generate the hash before someone with a bunch of GPUs does it.

Arthur Kalliokoski
bamccaig said:

the life of my CPU is more important to me than "mining" an experimental form of currency

If maxing out 6 cores is bad, why did you get 6 cores? Or just underclock it. Did you look at the temp readings?

bamccaig

If maxing out 6 cores is bad, why did you get 6 cores? Or just underclock it. Did you look at the temp readings?

It's not that it's bad for it, but it's that it won't actually get me anything unless I leave it running all day, every day; IF THEN. I'm sure maxing out all 6 cores 24/7 will slowly degrade the processor and hasten its inevitable failure. It's just not worth it. :)

Thomas Fjellstrom
bamccaig said:

I'm sure maxing out all 6 cores 24/7 will slowly degrade the processor and hasten its inevitable failure.

You'll only notice it if you have shitty cooling. If your cooling is decent, the cpu is still likely to last decades.

Michael Jensen
Billybob said:

No system is ever so well designed as to be irreproachable.

Of course not. But the first two pages of retarded crap are things you can find out have already been solved by looking at the wikipedia article on Bitcoin -- and likely were solved before the first line of code was ever written.

Obviously there are still issues, and will be issues. That's why I think it's great that this is open source. Anyone can fix anything, and anyone can review the fixes.

If a non-expert can pull it out of their ass as an issue, don't you think those are the things the designers discussed before building it? At least in the case of Bitcoin, I'd feel confident guessing they were.

Quote:

We all possess the intellectual capacity to both understand the Bitcoin system and improve upon it.

So instead of wasting time pondering about problems that have already been solved, go and contribute already! ;)

Billybob said:

You can also look into buying LR, Liberty Reserve bucks

I thought Liberty Reserve got shut down and raided by the fed ... in 2007?

That's good, but is it good enough? What if there is a fundamental flaw which results in the whole system being compromised such that no transactions can be trusted?

And what if the economy collapses tomorrow?

Actually I'd venture that if the system was so compromised -- a LOT of people -- people with money in the system, and with talent would rack their brains to come up with a good compromising fix which allowed most users to remain unharmed by the process -- and they'd probably get one -- or a something close -- or find a way to build a new system even better that takes care of the disadvantages, and allows the importing of old backed up, pre-fubar'd data...

Billybob said:

there have been; look back a few pages for a post of mine

That's actually what I based the above answer on. If you look in that thread you posted people were saying to not trade at all until the patch came out. I assume some other history may have been rolled back as well? Also for the few people who rendered tangible currency or other services for the exploited bit coins... well, they got ripped. So again, the exploit caused some damage, but the community ended up with a fix that was agreeable for most people.

It fact, in the anti-counterfeit measures on US currency are very weak

Agreed. Have you seen "Catch me if you can"? It's worth watching, but basically about how weak our counterfeiting measures USED to be. At any rate I think that's the basic model of things with closed source: Ignore problems until someone starts exploiting it, and then rush to make a patch. Whereas with open source, some nerd in college will find a new way to break things, decides he wants to wear a white hat that day and fix it. Heck even in closed source (I work for an extension of Microsoft after all) we find bugs. But if no one is willing to pay for them to be fixed... they sit in a database somewhere.

Also if you've been following recent events, I think they just broke debit cards again -- I think the basic gist is something like you copy the card with a slight modification and now knowing the pin # isn't necessary (that is a guess, I didn't look deeply into the technical side of it, but that's what I think they're doing.) Instead of fixing the issue, the banks are trying to sue the university students who presented it to them and were attempting to help them fix it... Fun times! >.<

Quote:

You originally called me stupid for saying that I trusted the reserve bank (of Australia) more than I trust the bincoin system.

Sigh, apologies, don't take it so harshly, I mostly meant it in jest. ;-) -- Also I wasn't calling you stupid for trusting the stability or security of the reserve bank of one over the other, but more the people -- I could never trust a banker or broker after what they're putting the world economy through right now. No -- not the teller at the counter, but the people actually running the banks. I need to stop being so lazy and move my money to a credit union!

Quote:

The job of the reserve bank is to keep the currency stable.

Is it? I didn't know that. I thought their job was to make a profit -- like all corporations... If their job is to stabalize the national fiat currency, they're failing in the US and we should fire them and hire a new bank!

Quote:

but rather talking about loss of value in general.

Right, you're worried about stability. Will I get back $.40 for every $1 I put in, or will I get back $1 for every .40 I put in? The problem is, we're still thinking about them as a currency to exchange with USD/AUD/etc, and not one to just buy/sell with and forget about other currencies. (Just think! No sales tax!) I mean if you go to Japan, you buy some yen, and you spend it. You don't (usually) worry about converting it back. I think Bitcoin has future potential to be the Internet's currency (if we embrace it.)

And fyi, that stability risk is always going to be there for any currency you trade in -- even ones backed in gold (because of inflation/deflation) -- Over time as it becomes more accepted and widely used (if it does, remember, Bitcoin is an experiment!), that will be more and more negated. But even the USD is declining in value now, that $1 cheese burger at mc donalds might still be $1, but it has less cheese burger in it, I assure you... -- As I posted earlier though, some people make a living trading currencies -- like on the ForEx market.

Quote:

I'm just saying that I don't trust it yet

Then I think we're on the same page. ;)

What's to stop an update from invalidating a random transaction that the development community just doesn't like?

How do they decide to like or dislike a transaction Dustin? There are no names, just public keys. There are no records of what the transaction was in exchange for... On top of that, why would they compromise the legitimacy of their own system; don't you think that would cause people to "jump the boat" rather quickly, so to speak, lowering the value of their own Bitcoins?

bamccaig said:

It's not that it's bad for it, but it's that it won't actually get me anything unless I leave it running all day, every day

From what I've been reading, it sounds like even then you will get nothing. It sounds like GPU mining is where it's at. ;)

bamccaig

From what I've been reading, it sounds like even then you will get nothing. It sounds like GPU mining is where it's at. ;)

I was actually disappointed to find that the client is extremely basic. There are very few configuration options. I don't know how to differentiate between GPU mining and CPU mining... My GPU isn't awesome, but it's not too shabby either, so I would imagine that it would help out... Nevertheless, I don't think it's right to have people mining the same coins. :-/ Just means the rich will continue being rich. :P Not that it matters. I doubt you can make any serious coin by mining anyway.

Billybob

What's to stop an update from invalidating a random transaction that the development community just doesn't like?

Nothing ... until someone notices. Then the dev team gets "fired" and new updates to the client will come from somewhere else. At which point their change will be reverted and the transaction will be valid again.

bamccaig said:

but saw no sign that anything was happening

They've been planning to remove that option from the GUI for awhile. Yes, it is doing something, but as others pointed out a CPU just doesn't have the power necessary to succeed in generating a block any time soon (unless you're insanely lucky). You could try downloading a CPU miner and joining a Mining Pool. This tool will tell you how many BTC you are likely to generate (through a pool).

I thought Liberty Reserve got shut down and raided by the fed ... in 2007?

You were thinking of the wrong thing. Liberty Reserve.

Apparently you can also use Dwolla to fund a Mt. Gox account. But I haven't personally used it, or know of its reputation (TF might want to check there U.S. only).

EDIT:

bamccaig said:

I don't know how to differentiate between GPU mining and CPU mining.

The Bitcoin Client only uses CPU, and as I said that feature is slated to be removed. You need a dedicated GPU mining client, like this fancy GUI interface.

Thomas Fjellstrom
Billybob said:

TF might want to check there

Dwolla seems to be US only? I looked at all the options they provided. They all require some kind of delay, either in mailing a check/money-order, or using an EFT (not sure they'd even take a canadian eft).

weapon_S

It is unthinkable that some hacker replaces millions of Windows instances with his own version ::)

Vanneto

You originally called me stupid for saying that I trusted the reserve bank (of Australia) more than I trust the bincoin system.

No he didn't. Go back and read what he wrote again. Slowly this time.

Jonatan Hedborg
weapon_S said:

It is unthinkable that some hacker replaces millions of Windows instances with his own version

He would only be able to trade with his own modified software, since other clients would not validate his transactions, essentially creating a miniature bitcoin network inside the network.

Dustin Dettmer
Billybob said:

Nothing ... until someone notices. Then the dev team gets "fired" and new updates to the client will come from somewhere else. At which point their change will be reverted and the transaction will be valid again.

We've seen in the past they can invalidate a transaction when the bug was discovered. Imagine a scenario where the masses get mad and decide they don't like some person. If everyone agrees on it -- there's no one to fire the developers.

What I'm saying is, because there's a back door. One day that back door will become a hot topic and a ripe avenue of control.

Jonatan Hedborg

Imagine a scenario where the masses get mad and decide they don't like some person.

It would be very hard to actually single someone out. There is as far as I know no way to find out what physical person is the recipient of a specific transaction.

It's also a pretty unlikely scenario, and one that could happen with regular currencies as well (except, unlike trade embargos, everyone who actually use the currency would have to agree to it)

decepto

Today I was thinking about how one would go about forecasting the future value of 1 bitcoin.

For a thought experiment lets assume that as of today, bitcoins as a currency are of equal monetary value to that of US dollars, Ceteris paribus. The find the exchange rate between bitcoins and USD, one would just need to find the ratio between the two currency's total money supply:

total number of bitcoins / total number of USD

The money supply of bitcoins is easy to determine. Determining the money supply for USD is a bit more difficult. For argument's sake, lets use a conservative figure: the current reported monetary base.

Using this data, the current approximate money supply of bitcoins is 6,000,000. The current approximate money supply of USD is 2,400,000,000,000 (2.4 Trillion).

The USD to bitcoin ratio would therefor be : 2,400,000,000,000 / 6,000,000 = .0000025

The bitcoin to USD ratio would be : 6,000,000 / 2,400,000,000,000 = 400,000.

Food for thought.

Dustin Dettmer

Hm, so if bitcoins took over us dollars a single bitcoin would be worth 33k. That's a nice thought -- I think I'll hold onto my 43.25 bitcoins.

Edgar Reynaldo

Math check :
2400/6 = 400
6/2400 = .0025

Not sure what that proves though.

decepto

Math check :
2400/6 = 400
6/2400 = .0025

Can you explain where these numbers come from?

Edit: 2.4 trillion is 2.4 million million.

Edit 2: Sorry, I meant to say 6 million, and I accidentally wrote 6 billion. I've updated the post above.

Dustin Dettmer

Google says:
2.4 trillion / 6 million = four hundred thousand
6 million / 2.4 trillion = 2.5 × 10-6 (ie 0.0000025)

Edgar Reynaldo
decepto said:

The USD to bitcoin ratio would therefor be : 2,400,000,000,000 / 6,000,000,000 = .000003

The bitcoin to USD ratio would be : 6,000,000,000 / 2,400,000,000,000 = 33,333.

Your figures show 2.4 Trillion to 6 Billion, which gives the ratios I just posted. But you actually said there were 2.4 Trillion US Dollars and 6 Million Bitcoins, so that makes the ratios (after dividing top and bottom by 1,000,000) :
2,400,000/6 = 400,000
6/2,400,000 = 0.0000025

decepto

I knew my math degree would come in handy ::)

Thank you for catching that, I've updated in the post.

Dustin Dettmer

I think 6 million is the wrong number.
https://en.bitcoin.it/wiki/Myths#Early_adopters_are_unfairly_rewarded

It looks like the actual number is 21 million, so:
2.4 trillion / 21 million = 114 285.714

Which means my 43.25 coins would be worth $4,942,857.13 :D.

decepto

I think 6 million is the wrong number.

There are currently 6 million in circulation, roughly speaking.

http://en.wikipedia.org/wiki/File:Total_bitcoins_over_time.png

Edit:

Well, I found a kind soul on Reddit to sell me 10 bitcoins. I bought them at $5.50 USD. We'll see where this goes...

weapon_S
decepto said:

Well, I found a kind soul on Reddit to sell me 10 bitcoins. I bought them at $5.50 USD.

It could be me, but someone here doesn't know the proper exchange rate. :o
How did you make 3.25 Bc, Dustin?

Dustin Dettmer

I bought them using Paypal before it got blocked.

BAF

Bump, to keep it alive. I'm interested in seeing where this goes - I'm trying to find someone to sell me some over PP at a good exchange rate, now that it's on the rise after today's drop. I'd bid on mtgox, but I'm waiting for dwolla to verify my account.

decepto

What's going on? Should I sell or wait?

So far I've turned my $40 into $170.

Please tell me you didn't sell them. Your 43.25 Bitcoins are now worth ~375 USD.

bamccaig
decepto said:

Please tell me you didn't sell them. Your 43.25 Bitcoins are now worth ~375 USD.

Unless the rise in value of Bitcoins is predictable there's no shame at all in cashing them in ASAP while there's a very reasonable return on your investment because if you wait too long the tables may turn. :-/ It doesn't matter if you would have made more money if you waited because just as easily you might have lost it all if you waited. :-/ You could also cash a fraction of them in so the original investment (and maybe a little extra for spending money) is at least
"protected"[1].

References

  1. Then again, the banks could decide it's inflation time and fuck you on traditional currencies any time they want... :-X
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