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Bitcoin - P2P currency
decepto
Member #7,102
April 2006
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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

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Boom!

Arthur Kalliokoski
Second in Command
February 2005
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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.

The only way Trump is going to be involved in a landslide is if the land surrounding the White House collapses into the Earth's core. -- bamccaig

Thomas Fjellstrom
Member #476
June 2000
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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.

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Matthew Leverton
Supreme Loser
January 1999
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Bitcoins sound as worthless as a Canadian dollar.

Thomas Fjellstrom
Member #476
June 2000
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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? ;)

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Thomas Fjellstrom - [website] - [email] - [Allegro Wiki] - [Allegro TODO]
"If you can't think of a better solution, don't try to make a better solution." -- weapon_S
"The less evidence we have for what we believe is certain, the more violently we defend beliefs against those who don't agree" -- https://twitter.com/neiltyson/status/592870205409353730

Arthur Kalliokoski
Second in Command
February 2005
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Everybody including China and Russia know the US dollar is crap, that's why they don't use it as an international standard anymore.

The only way Trump is going to be involved in a landslide is if the land surrounding the White House collapses into the Earth's core. -- bamccaig

Trezker
Member #1,739
December 2001
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I'd like to know more on the part about mining...

Tobias Dammers
Member #2,604
August 2002
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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.

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Thomas Fjellstrom
Member #476
June 2000
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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.

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Thomas Fjellstrom - [website] - [email] - [Allegro Wiki] - [Allegro TODO]
"If you can't think of a better solution, don't try to make a better solution." -- weapon_S
"The less evidence we have for what we believe is certain, the more violently we defend beliefs against those who don't agree" -- https://twitter.com/neiltyson/status/592870205409353730

Tobias Dammers
Member #2,604
August 2002
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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...

---
Me make music: Triofobie
---
"We need Tobias and his awesome trombone, too." - Johan Halmén

Arthur Kalliokoski
Second in Command
February 2005
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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.

The only way Trump is going to be involved in a landslide is if the land surrounding the White House collapses into the Earth's core. -- bamccaig

Jonatan Hedborg
Member #4,886
July 2004
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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.

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Sweden: Free from the shackles of Democracy since 2008-06-18!

Billybob
Member #3,136
January 2003

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
Member #4,886
July 2004
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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

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Sweden: Free from the shackles of Democracy since 2008-06-18!

Matthew Leverton
Supreme Loser
January 1999
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The exchange rate will drop fast once spammers start installing bitcoin apps on their zombie networks. :P

X-G
Member #856
December 2000
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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

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Bob
Free Market Evangelist
September 2000
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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.

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Trezker
Member #1,739
December 2001
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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
Member #3,136
January 2003

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
Member #4,886
July 2004
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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).

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Sweden: Free from the shackles of Democracy since 2008-06-18!

Neil Walker
Member #210
April 2000
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Bitcoins sound as worthless as a Canadian dollar.

Or a health food store in America.

Neil.
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Billybob
Member #3,136
January 2003

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
Member #4,886
July 2004
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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?

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Sweden: Free from the shackles of Democracy since 2008-06-18!

Trezker
Member #1,739
December 2001
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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
Member #8,643
May 2007

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

In capitalist America bank robs you.



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