Blockchain technology

[Mikey]

I don't think TPTB are going to just let it replace what they have taken centuries to accomplish in terms of the control of money.

You could compare it with Microsoft vs. the Open Source community in the late 1980's. Sure, Microsoft protested a lot in the beginning and surely saw the Open Source movement as an annoyance or even danger to their existence, but today it is clear that Microsoft could not stop the developement from happening. Now, Microsoft is certainly paying attention to not make a mistake, since that could cause Open Source to gain more momentum. I think the same principle could be applied to the banking system.

I guess I would be worried that if it grows it will be co-opted somehow and that it is to get people to accept and accustomed to the idea of electronic currency.

Electronic currency is not 'good' or 'bad' as such, in fact it is extremely convenient. However, it all depends on the "third force", the external circumstance: If you want to enslave the world with it, or if you want small businesses all over the world to flourish and make business with each other more easily.

 

[Mike]

I guess I would be worried that if it grows it will be co-opted somehow and that it is to get people to accept and accustomed to the idea of electronic currency.

Electronic currency is not 'good' or 'bad' as such, in fact it is extremely convenient. However, it all depends on the "third force", the external circumstance: If you want to enslave the world with it, or if you want small businesses all over the world to flourish and make business with each other more easily.

I agree electronic currency isn't bad in and of itself, so we'll just have to see what happens. Two fairly recent examples of alternatives to gov't currency being taken out:

The Liberty Dollar
http://consumerist.com/2008/11/21/how-uncle-sam-killed-the-liberty-dollar/

and

E-Gold
http://www.dailypaul.com/96015/e-gold-feds-shut-down-only-real-competitor-to-their-bogus-fiat-money-system

 

[Mike]

I little bit old, but thought that it is worth posting:

US Begins Regulating BitCoin, Will Apply "Money Laundering" Rules To Virtual Transactions

http://www.zerohedge.com/news/2013-03-21/us-begins-regulating-bitcoin-will-consider-virtual-transactions-money-laundering

 

[mantype3]

This guy has some interesting arguments supporting the idea that Bitcoin is really a Ponzi scheme like the US dollar and other fiat currencies, and they are not related to it being based on opensource clients on p2p networks. He says its essentially a big bubble of speculation. Here is the playlist of videos about bitcoin on his youtube channel, as food for thought:

http://www.youtube.com/watch?v=0UKC7iaBKvs&list=PLNK_isA40yp3U_xMFW4Fu9Pn3_KR_b9zx&index=2

Basically, what I think he's saying is that Bitcoin operates like a pyramid scheme where, if you go in early you reap lots of benefits from the people who get into it later. Evidence for this is the progressively increasing difficulty in mining, and therefore increase in mining dedicated hardware costs, and by creating propaganda (manufacturing demand) to actually make the initally worthless Bitcoins created fetch a price in other currencies. The first 6 mil Bitcoins were mined with very little difficulty by few people that started early, so they essentially got "free lunch"...

Your thoughts?

 

[Bobo08]

This Bitcoin Wiki page addresses many of the criticisms against it: _https://en.bitcoin.it/wiki/Myths

This guy has some interesting arguments supporting the idea that Bitcoin is really a Ponzi scheme like the US dollar and other fiat currencies, and they are not related to it being based on opensource clients on p2p networks. He says its essentially a big bubble of speculation. Here is the playlist of videos about bitcoin on his youtube channel, as food for thought:

_http://www.youtube.com/watch?v=0UKC7iaBKvs&list=PLNK_isA40yp3U_xMFW4Fu9Pn3_KR_b9zx&index=2

Basically, what I think he's saying is that Bitcoin operates like a pyramid scheme where, if you go in early you reap lots of benefits from the people who get into it later.

Evidence for this is the progressively increasing difficulty in mining, and therefore increase in mining dedicated hardware costs,

The increase in mining difficulty is the result of more people doing it. It has to be adjusted so as to keep the rate of bitcoin supply constant (within a certain period).

and by creating propaganda (manufacturing demand) to actually make the initally worthless Bitcoins created fetch a price in other currencies.

The big jump in Bitcoin value and popularity only happened after the Cyprus bank confiscation. The demand was "manufactured" by the European elites, not Bitcoin adopters/backers.

About the argument that Bitcoins are worthless, from the Bitcoin Wiki:

The first 6 mil Bitcoins were mined with very little difficulty by few people that started early, so they essentially got "free lunch"...

See the above quote about early adopters accepting higher risks.

Your thoughts?

Personally, I think Bitcoin is a fascinating idea, whose time has come. In a sense, it is backed and regulated by mathematics, which is the most reliable backing possible. What is also very interesting is that the project has matured enough at this exact point in time when people are beginning to lose confidence in the traditional banking system en mass. All of these give it more potential than other alternative currency schemes although it is still too early to say much more than that.

 

[herondancer]

Bitcoin does seem to be an interesting idea with promise. But it still has that fatal flaw of being dead in the water if electronic transfer systems, i.e. the internet, is shut down, whether from nefarious gov agencies or plain old natural disasters. If one were to be participating in the Bitcoin economy, wouldn't it be prudent to take the value earned and turn it into practical assets like pressure cookers, canning jars, supplements and the like? :)

 

[whitecoast]

Bitcoin sounds incredible. My biggest concern about it is conspiracy-related. Bitcoin security is organized such that the only way to fake a transaction is if you possess more processing power than the entire network mining bitcoins. With commercially available technology that is almost impossible. However, according to the Cs the PTB have technology that is over a century ahead of what's commercially available. Given that, they could either use that superior processing power to subvert and implode the market, or use it to mine application the bitcoins out of reach for most other people and start cornering the market.

It may not happen, but if it does it would give more insight into what the PTB are capable of. They may not risk exposing that though.

 

[mantype3]

Bitcoin sounds incredible. My biggest concern about it is conspiracy-related. Bitcoin security is organized such that the only way to fake a transaction is if you possess more processing power than the entire network mining bitcoins. With commercially available technology that is almost impossible. However, according to the Cs the PTB have technology that is over a century ahead of what's commercially available. Given that, they could either use that superior processing power to subvert and implode the market, or use it to mine application the bitcoins out of reach for most other people and start cornering the market.

It may not happen, but if it does it would give more insight into what the PTB are capable of. They may not risk exposing that though.

Hmm, I doubt that. Because if they do have that sort of processing power it would seem kinda wasted on attacking the BTC system, they could probably use it for much bigger projects. They'd have to weigh benefits against opportunity costs and i don't think it would be economical. 'Cause it's doable, just not practical/economical.

 

[williamsj]

Bitcoin sounds incredible. My biggest concern about it is conspiracy-related. Bitcoin security is organized such that the only way to fake a transaction is if you possess more processing power than the entire network mining bitcoins. With commercially available technology that is almost impossible. However, according to the Cs the PTB have technology that is over a century ahead of what's commercially available. Given that, they could either use that superior processing power to subvert and implode the market, or use it to mine application the bitcoins out of reach for most other people and start cornering the market.

It may not happen, but if it does it would give more insight into what the PTB are capable of. They may not risk exposing that though.

Hmm, I doubt that. Because if they do have that sort of processing power it would seem kinda wasted on attacking the BTC system, they could probably use it for much bigger projects. They'd have to weigh benefits against opportunity costs and i don't think it would be economical. 'Cause it's doable, just not practical/economical.

I'll back that, being a geek that likes playing with hardware, I have quite a bit; have just joined a mining pool and will bring the servers live at the weekend. This is not I want to get rich scheme, this is a chance to take part in a very large network of processing, a rare opportunity for a private techie individual.

I doubt I am the only hardware geek looking at this and I expect that between us we can bring on board enough processing power to network ratio to keep TPTB at bay. The mining pools will have an eye on the power delivered and can no doubt cut off extreme attempts at a power take over attempts.

Looking at the architecture and code, this has been put together such that even the inventors of the system cannot attack it. Layers of encryption this deep would take centuries to break with current technology, and then only if the system was frozen.

I would say this could be the next step in the technological revolution past PayPal.

 

[Tomek]

I doubt I am the only hardware geek looking at this and I expect that between us we can bring on board enough processing power to network ratio to keep TPTB at bay. The mining pools will have an eye on the power delivered and can no doubt cut off extreme attempts at a power take over attempts.

Well, regarding the new ASIC processors and their efficiency in terms of computation power per watts consumed, TPTB could easily build an array to overtake the network. See _https://en.bitcoin.it/wiki/Weaknesses#Attacker_has_a_lot_of_computing_power

The results will be a total loss of confidence regarding the BTC and the abandon of the current blockchain.

I would say this could be the next step in the technological revolution past PayPal.

I'm not sure to understand this phrase, are you saying that PayPal is in any way a technological revolution ?

 

[Mikey]

The first 6 mil Bitcoins were mined with very little difficulty by few people that started early, so they essentially got "free lunch"...

Not really, since at this point it was not known that Bitcoin ever would be accepted and would be worth anything. It was a highly experimental idea only, more like a computer game for tech freaks than anything else connected with real value. Edit: Real value only comes in when a currency is trusted.

However, according to the Cs the PTB have technology that is over a century ahead of what's commercially available. Given that, they could either use that superior processing power to subvert and implode the market, or use it to mine application the bitcoins out of reach for most other people and start cornering the market.

On the other hand, since Bitcoin is completely transparent, and all and every transactions are broadcast to everyone, nothing is a secret. So, whoever would do it, would risk his own exposure or at least risk the questioning of the validity of his defrauded wealth.

From the original paper by the Bitcoin inventor "Satoshi Nakamoto":

The network timestamps transactions by hashing them into an ongoing chain of hash-bashed proof-of-work, forming a record that cannot be changed without re-doing the proof-of-work. The longest chain not only serves as proof of the sequence of events witnessed, but proof that it came from the largest pool of CPU power. As long as a majority of CPU power is controlled by [peer] nodes that are not cooperating to attack the network, they'll generate the longest chain and outpace attackers.

This is especially interesting in the view of the system of normal people vs. pathological individuals. In our current system, the small percentage of psychological deviants (about 6%) have managed to dominate the rest (94%). However, Bitcoin is based on the principle that as long as there are more "honest" nodes, the "inhonest" ones can never "outpace" them. It is a "majority" decision.

Proof-of-work is essentially one-CPU-one-vote. The majority decision is represented by the longest chain [of transactions], which has the greatest proof-of-work effort invested in it. If a majority of CPU power is controlled by honest nodes, the honest chain will grow the fastest and outpace any competing [transaction] chains. To modify a past block, an attacker would have to redo the proof-of-work of the [modified] block and all blocks after it and then catch up with and surpass the work of the honest nodes. We will show later that the probability of a slower attacker catching up diminishes exponentially as subsequent blocks are added.

Bitcoin is incentive based, to encourage playing by the rules. The incentives to mathematically "solve" or "mine" the hashes for each transaction block is to 1) earn Bitcoins until all 21 Million Bitcoins are in circulation and 2) earn small transaction fees for all transactions in that block. Also, an attacker could only "steal back" coins that he already has spent. He cannot simply steal coins from others that he never had, which makes the incentive to cheat mathematically pretty uninteresting:

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 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.

 

[williamsj]

Well, regarding the new ASIC processors and their efficiency in terms of computation power per watts consumed, TPTB could easily build an array to overtake the network. See _https://en.bitcoin.it/wiki/Weaknesses#Attacker_has_a_lot_of_computing_power

The results will be a total loss of confidence regarding the BTC and the abandon of the current blockchain.

This says:

An attacker that controls more than 50% of the network's computing power can, for the time that he is in control, exclude and modify the ordering of transactions. This allows him to:
Reverse transactions that he sends while he's in control. This has the potential to double-spend transactions that previously had already been seen in the block chain.

But ONLY of his transactions

Prevent some or all transactions from gaining any confirmations
Prevent some or all other miners from mining any valid blocks

All that is missing here is the ability to blacklist a miner, in the same way as mail servers grey or blacklist spam sites now.
But in any eventuality, they can do no more than stated above. It is a DOS attack at worst.

I'm not sure to understand this phrase, are you saying that PayPal is in any way a technological revolution ?

Of course it was/is, prior to PayPal paying for goods or services via the internet required a credit card, and trust in the vendor, or sending a check or bank transfer and waiting for the banking whales to process your request. Or just putting notes in an envelope :/ Now I can send funds to buy a software license and have it on the web instantly or by email in minutes. If I never draw the income from PayPal, it is a very similar asset storage to bitCoin.

 

[Mikey]

Bitcoin does seem to be an interesting idea with promise. But it still has that fatal flaw of being dead in the water if electronic transfer systems, i.e. the internet, is shut down, whether from nefarious gov agencies or plain old natural disasters. If one were to be participating in the Bitcoin economy, wouldn't it be prudent to take the value earned and turn it into practical assets like pressure cookers, canning jars, supplements and the like? :)

I think that investing any kind of money -- paper or virtual -- into real assets is always a good idea. However, if the internet is shut down and Bitcoin dies, we would live in such a different reality that any bets are off.

 

[williamsj]

Bitcoin does seem to be an interesting idea with promise. But it still has that fatal flaw of being dead in the water if electronic transfer systems, i.e. the internet, is shut down, whether from nefarious gov agencies or plain old natural disasters. If one were to be participating in the Bitcoin economy, wouldn't it be prudent to take the value earned and turn it into practical assets like pressure cookers, canning jars, supplements and the like? :)

I think that investing any kind of money -- paper or virtual -- into real assets is always a good idea. However, if the internet is shut down and Bitcoin dies, we would live in such a different reality that any bets are off.

Is this not a kind of strategy game, where we have to be prepared for anything, but have also to live with the present?

 

[mantype3]

Forget about attacking the blockchain, what about controlling its price through owning a large amount of them? If some of the early people still hold large amounts of those 6 mil BTC they could use it as leverage to influence it, speculate, etc. I myself am no economist so i don't know how this could work but it seems vulnerable in that respect.

Also, some hackers are supposedly using the coin as stock for speculation, by DDoS'ing exchange sites, forcing the bitcoin to drop in value, then buying, relaxing the attack, and then selling at a higher price. This instantaneous significant fluctuations could probably hurt Bitcoin popularity, and thus, its acceptance, IMO.

Another issue is the way to protect your money is different in the case of Bitcoin. People have to be at least moderately tech savvy to correctly protect their own wallets from hackers...