smstonypoint
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Bitcoin: What do you think?
- Thread starter dave1949
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joshuabardwell
Elite Member
I'm not an economist, but isn't that what "deflationary" means? Inflation means your money is worth less; deflation means your money is worth more.
joshuabardwell
Elite Member
You're wrong about this. Every single transaction of every single bitcoin can be traced back to the bitcoin's creation. Here, you can see the number of bitcoins in circulation over time.
https://blockchain.info/charts/total-bitcoins
The point of bitcoin is not that it is untraceable, but that it is anonymous. I can know that a wallet with cryptographic key X transferred 1 bitcoin to a wallet with cryptographic key Y. Everyone in the world knows that. It's who owns those wallets that is un-known.
joshuabardwell
Elite Member
The answer to "how do they know" is that bitcoins are created by solving a cryptographic function. Once somebody has solved the function, they submit the solution to the network. If a sufficient number of other nodes on the network agree that the solution is correct, the person is awarded the bitcoin. Transactions occur the same way. The recipient says, "I have received bitcoin number 1234567, and here is the solution to the cryptographic function that proves it." The recipient can only have the correct solution if the current owner of that bitcoin has transferred it to them (or if they have stolen the wallet containing the bitcoin). Again, the network checks the solution and if it is correct, the network notes that the new wallet "owns" the bitcoin.
The record of every single transaction that has ever occurred is known as the "blockchain", and it is by verifying the blockchain that new bitcoins are "minted", and transactions are validated. So computers who are trying to "mine" new bitcoins are the same ones who are doing the work of verifying that existing transactions are valid. The blockchain is absolutely verifiable, for every single transaction, all the way back to when the bitcoin was first mined.
The main vulnerability in this consensus-based model is that if a hostile entity were to control more than 50% of the nodes on the network, they could lie about whether a given transaction was valid, and they would overrule the "honest" computers. In other words, they could say, "all the bitcoins in the world get transferred to me!" Everyone else in the world would say, "No. Not valid." But they would be out-voted. Currently, though, this would require resources on the scale of a nation-state, or a very large corporation, to accomplish. And the massive disagreement between the nodes would surely be noticed immediately.
Here is a good overview of "how bitcoin works".
http://www.michaelnielsen.org/ddi/how-the-bitcoin-protocol-actually-works/
The record of every single transaction that has ever occurred is known as the "blockchain", and it is by verifying the blockchain that new bitcoins are "minted", and transactions are validated. So computers who are trying to "mine" new bitcoins are the same ones who are doing the work of verifying that existing transactions are valid. The blockchain is absolutely verifiable, for every single transaction, all the way back to when the bitcoin was first mined.
The main vulnerability in this consensus-based model is that if a hostile entity were to control more than 50% of the nodes on the network, they could lie about whether a given transaction was valid, and they would overrule the "honest" computers. In other words, they could say, "all the bitcoins in the world get transferred to me!" Everyone else in the world would say, "No. Not valid." But they would be out-voted. Currently, though, this would require resources on the scale of a nation-state, or a very large corporation, to accomplish. And the massive disagreement between the nodes would surely be noticed immediately.
Here is a good overview of "how bitcoin works".
http://www.michaelnielsen.org/ddi/how-the-bitcoin-protocol-actually-works/
Last edited:
MikeFarm
Gold Member
Hi Bob
It's not a program, its an algorithm and many people have written there own programs. The algorithm so it can't really be hacked like a program in that way. Also:
"since no one really knows how many bitcoins there are..." - that is known exactly.
"what is the total amount of bitcoin in circulation" - again known exactly and "how do they know...can they prove it...." yes, it's provable.
Bitcoins are really very neat and well thought out, there is no doubt that the creator is a genius for seeing how that algorithm can be used to create a monetary system and he/she went off and implemented it.
Mike
It's not a program, its an algorithm and many people have written there own programs. The algorithm so it can't really be hacked like a program in that way. Also:
"since no one really knows how many bitcoins there are..." - that is known exactly.
"what is the total amount of bitcoin in circulation" - again known exactly and "how do they know...can they prove it...." yes, it's provable.
Bitcoins are really very neat and well thought out, there is no doubt that the creator is a genius for seeing how that algorithm can be used to create a monetary system and he/she went off and implemented it.
Mike
MikeFarm
Gold Member
Thanks Josh, just looked it up and yes bitcoin is in that way deflationary but it gets harder to create each coin so you can't just print more and more very quickly like printing money in a real mint like many countries have done in the past. In fact you would not be able to use bitcoins quite as easily as normal currency to control intererest rates as in "monetary policy".
joshuabardwell
Elite Member
The inability to manipulate Bitcoin per "monetary policy" is a feature, not a bug. As for Bitcoin's deflationary nature: each Bitcoin can actually be sub-divided into one million sub-units, called "Satoshi" (named after the founder of Bitcoin). So even if the currency becomes heavily deflated, it should have enough granularity to remain useful for day-to-day transactions. The nice thing is that nobody has to change out their bills or coins if the currency deflates to 1/100th or 1/1000th of its current value. Just shift the decimal point on the transaction and away you go.
grsthegreat
Super Star Member
hmmmm... what do you think of this
Flaw in Bitcoin, exchange shutdowns, $2.7 million theft: Is the end coming? | VentureBeat | Business | by Barry Levine
Flaw in Bitcoin, exchange shutdowns, $2.7 million theft: Is the end coming? | VentureBeat | Business | by Barry Levine
/pine
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Sorry if this has been addressed I have not followed the thread...
The credit card / banks have to be way ahead of the game on the future of electronic money...
I see card / chip (as well as iris or f-print) scanners coming on new computers and USB dongles for older machines...
security and confidence will be the backbone of the future form of e-money IMO...
The credit card / banks have to be way ahead of the game on the future of electronic money...
I see card / chip (as well as iris or f-print) scanners coming on new computers and USB dongles for older machines...
security and confidence will be the backbone of the future form of e-money IMO...
joshuabardwell
Elite Member
The Bitcoin flaw that shut down Mt. Gox does not allow the theft of coins. Basically, what it does is cause a transaction to appear to go through multiple times, causing a person's account to have a lower balance than it should, but the system always eventually resolves the transactions correctly. For more:
So then what about the $2.7 million theft? The Mt. Gox flaw does NOT allow fraudulent transactions to go through. Also, SR usually stores their Bitcoins in cold (offline) storage, but they had just "coincidentally" temporarily moved all of them to hot (online) storage to do a system upgrade or something at the time of the theft. So the Silk Road story does not add up. The explanation that makes the most sense to me is that the organizers of Silk Road themselves are the ones who have stolen the $2.7 million, and they are using people's misunderstanding of the Mt. Gox flaw as a cover story.
It's important for people to realize that BitCoin is very much like cash in the way it is transferred and held. A whole bunch of people gave a whole bunch of cash to some unsavory characters, who then ran off with it. This is hardly a novel story, and it is hardly unique to Bitcoin.
TnAndy
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I think anything that is as simple as currency that takes a whole lot of head scratching to "get it" is not something I want to fool with.
I also think "If you don't hold it, you don't own it".
( and yes, that applies to US fiat currency, as many folks that held MF Global accounts will tell you )
I also think "If you don't hold it, you don't own it".
( and yes, that applies to US fiat currency, as many folks that held MF Global accounts will tell you )
I don't think a Bitcoin ATM will be coming to my town anytime soon. :laughing: But, it is interesting following this just to see how it unfolds, or folds.
Bitcoin ATMs coming to the U.S. - CNN.com
To create a Robocoin account, a user enters their mobile phone number at one of the kiosks. The machine sends a code to that phone and, after the user enters the code, they are asked to scan the palm of their hand.
"Your phone is your user ID and your palm is your password," Kelly said.
The user is then asked to insert a driver's license or other government-issued ID, further personalizing their account as well as providing Robocoin an opportunity to verify the user's name against government watch lists for terrorists or others who may not legally do business in the machine's home country.
Then, the user takes a photo at the kiosk, which must be verified as a match with the picture on their ID card.
Once their account is verified, a process Kelley said takes two to five minutes, they are free to buy Bitcoins at the kiosk. Customers may either transfer them to an account, using a private code the machine dispenses, or use a smartphone app to store them on their phone.
Loren49
Veteran Member
https://en.bitcoin.it/wiki/Deflationary_spiral
Deflationary spiral is an economic argument that proposes that runaway deflation can eventually lead to the collapse of the currency given certain conditions and constraints. It is a common criticism made against the viability of Bitcoin. The 租eflationary spiral is a real condition that affects the popular fractional reserve backing system. Bitcoin is not affected by this because it is fundamentally different from popular currency.
Deflation is a decline in the general price level. Deflation occurs when the price of goods and services, relative to a specific measure, decline. It is not necessarily that the value of the goods and services themselves declined, but can be because the value of the currency itself increased.
Lots more information at site.
Loren
Brad_Blazer
Veteran Member
First penny auctions now Bitcoin. The gullibility of ponzi scheme investors is astounding. What is incredible about Bitcoin is that they call it a currency so there isn't even a pretense of having a product.
jaotguy
Veteran Member
there are a limited number of bitcoins ... 49% are owned/held by 1 entity already....
just like shares , each one appreciates in value as long as someone is willing to pay more for a "share" ( or portion of ) than the original stock price... eventually it will even out as the ceiling is reached ....
yes the first ones to get in will make mega bux ... the rest , less so ... and the tailenders will end up footing the bill eventually ....
The governments will step in as more companies try to copy / cash in .... and they will demand to know who bought what and for how much, then check to see if the "taxes" were paid on the transactions or increase in value when sold or exchanged. It's gonna get messy.
just remember " there are no physical bitcoins " ... only electronic entities ... BTW , anyone seen the emperor's new clothes?
just like shares , each one appreciates in value as long as someone is willing to pay more for a "share" ( or portion of ) than the original stock price... eventually it will even out as the ceiling is reached ....
yes the first ones to get in will make mega bux ... the rest , less so ... and the tailenders will end up footing the bill eventually ....
The governments will step in as more companies try to copy / cash in .... and they will demand to know who bought what and for how much, then check to see if the "taxes" were paid on the transactions or increase in value when sold or exchanged. It's gonna get messy.
just remember " there are no physical bitcoins " ... only electronic entities ... BTW , anyone seen the emperor's new clothes?
joshuabardwell
Elite Member
Do you have a citation for that? The numbers I have heard are not ... quite as lopsided.
927 People Own Half Of The Bitcoins - Business Insider
BTW, if being lop-sided is going to curse a currency, the dollar is in big trouble.
jaotguy
Veteran Member
that "entity" was the original developer and all the major players that set it up ....... just to make sure they got their share of the spoils ...
