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Thread: Bitcoin

  1. #1
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    Default Bitcoin

    Was reading about this today, sounds really interesting. Reminded me a bit of that story a few years back where some guy perpetrated a fraud in game currency on Better Than Life (or something like that) - which raised some interesting questions as the game currency trades on ebay and various other places for real money ie it has an exchange rate with the real world so arguably he'd committed a real crime. Anyway, seems that these Bitcoin things ought to be more secure than that - or are they?
    For those who don't know what I'm on about

    Bitcoin is a digital currency created in 2009 by Satoshi Nakamoto. The name also refers both to the open source software he designed to make use of the currency and to the peer-to-peer network formed by running that software. Interest in Bitcoin, represented by Google searches for the term, rose enormously in the second quarter of 2011.[1] As of May 2011, no major retailer accepts the currency for payment.[2]
    Unlike other digital currencies, Bitcoin avoids central authorities and issuers. Bitcoin uses a distributed database spread across nodes of a peer-to-peer network to journal transactions, and uses digital signatures and proof-of-work to provide basic security functions, such as ensuring that bitcoins can be spent only once per owner and only by the person who owns them.
    Bitcoins, often abbreviated as BTC, can be saved on a personal computer in the form of a wallet file or kept with a third party wallet service, and in either case bitcoins can be sent over the Internet to anyone with a Bitcoin address. The peer-to-peer topology and lack of central administration are features that make it infeasible for any authority (governmental or otherwise) to manipulate the quantity of bitcoins in circulation, thereby mitigating inflation.[3]
    I'm interested in this lack of central control and how things such as inflation etc will work. I'm also not sure how new ones are generated - it says that they will be generated in decreasing amounts to a fixed finite level but who gets them? - and what it means for the currency. How likely is it to be superseded by another similar system etc etc?

    http://en.wikipedia.org/wiki/Bitcoin

    Has anyone ever used these?

    (I didn't know if this should go in politics or technology or what so I stuck it in miscellaneous)

  2. #2
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    My little bro knew about this when they were worth .10c a pop. Now worth about 20 dollars a go (and were about 30 dollars a week ago).

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    And did he get any? I think that the way that the coins are disseminated means that there should be an advantage in being an early adopter - necessary I suppose if you're going to get the thing off the ground.

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    Quote Originally Posted by IdleRich View Post
    And did he get any? I think that the way that the coins are disseminated means that there should be an advantage in being an early adopter - necessary I suppose if you're going to get the thing off the ground.
    yeh, pyramid schemes tend to favor the early adopter...
    this looks handy tho http://www.wired.com/threatlevel/2011/06/silkroad/

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    Interesting, yes. So, supposing I sell a load of things and get some bitcoins, how do I turn them back into cash? And how do I do it anonymously?

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    Very interesting thanks. So, the creation of coins is an incentive for people to use their computing power to verify transactions. But what's the incentive once the limit of coins has been reached?

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    This is the question I was asking I guess (followed through to this from one of the links on Sectionfive's link).

    Privacy: This is something I cannot grasp. Every transaction is publicly visible. So if you send me money, I know your bitcoin address and can then look at blockexplorer.com to see the addresses that show where you got the money. And then I can see the addresses that sent them the money. And so on. Won't it be possible, after linking with outside data, to have a pretty good guess based on transaction activity who everyone is? Yet Bitcoin is touted as being pseudonymous.

  9. #9
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    Possibly unrelated, as I don't know f-all about these things... But - aren't these mainly used illegally to buy narcotics/dodgy stuff online?

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    I did some reading around these a few weeks ago, around about the time there were various hysterical proclamations of how it would be completely illegal within the year and/or bring about the collapse of governments and their banking overlords etc etc. It's tinfoil hat internet libertarian catnip this stuff. I don't actually have any though, so I'm far from an expert.

    Anyway, cryptographically speaking they seem quite cunningly constructed (people can't cheat unless they are generating > 50% of all bitcoins I believe). Though if it properly takes off then they should still be around when we reach a point where SHA-256 is broken which would kind of ruin them entirely (http://blog.ezyang.com/2011/06/bitco...decentralized/).
    The criticisms mainly seem to be from an economics angle, and I'm afraid I don't understand them quite as much. "It's a pyramid scheme" is the main one, but I'm not totally convinced. It definitely favours early adopters, but that doesn't necessarily mean it's unsustainable by any means. I think the metaphor they're going for is a gold rush, and while early miners did better, gold still seems to be pretty valuable.

    At the moment you can basically use them for illegal stuff, serious nerd stuff and of course the intersection of the two (for example lulzsec have been sent ~ $10,000 worth of them apparently in payment for, well, lulz I suppose). Supposedly you can quite merrily buy all the drugs you could ever wish for from a number of different sites.

    Turning bitcoins into cash anonymously can be done, the most basic level of which would be turn up to a pre-arranged place with a usb stick full of bitcoins, and swap it with someone for cash. Totally anonymous, untraceable and all that. Which is quite fantastically cyberpunk imo. There might be less meatspace ways of doing it as well I suppose, Western Union or whatever mechanism Nigerian princes are currently using to accept deposits.

    Finally (for now), the anonymous issue. I think all transactions are indeed visible, so you can always see what bitcoin address sent / received the money. The problem is then linking that address to a person. The address are completely disposable, and any one can generate a new one at any time.
    Last edited by 4linehaiku; 14-06-2011 at 09:04 AM. Reason: Grammar

  11. #11
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    "Turning bitcoins into cash anonymously can be done, the most basic level of which would be turn up to a pre-arranged place with a usb stick full of bitcoins, and swap it with someone for cash. Totally anonymous, untraceable and all that. Which is quite fantastically cyberpunk imo. There might be less meatspace ways of doing it as well I suppose, Western Union or whatever mechanism Nigerian princes are currently using to accept deposits."
    OK, that makes sense then. Basically you can see all the internet transactions involving bitcoins but as they are stored on a hard drive or whatever you can swap that physically with someone and when they are used in a new transaction there is no way to tell they are the bitcoins which belonged to the seller. In other words, all (internet) transactions are traced but the coins themselves are not.

    "I did some reading around these a few weeks ago, around about the time there were various hysterical proclamations of how it would be completely illegal within the year and/or bring about the collapse of governments and their banking overlords etc etc. It's tinfoil hat internet libertarian catnip this stuff. I don't actually have any though, so I'm far from an expert."
    Traditionally alternative monetary systems have been stamped on by the governments that issue the country's real money I guess - although I think they allowed the Dalston Slice to continue unimpeded despite the obvious threat to sterling it posed.

    http://www.core77.com/blog/object_cu...mill_14156.asp

    One thing that seems to be controversial anyway is the thing about the fixed and finite number of coins that will ultimately exist. Why did they build this feature into it? I've seen people talk about the disadvantages and people argue that they are not disadvantages but I haven't seen anyone say what the advantages are.

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    Well that's sort of my point. There's a Totnes alternative currency as well I believe, and the government is clamping down on these things because they are basically no big deal. I suspect bitcoin will also remain not a big deal and therefore be fine. I'm not doubting that they would take action if it actually became large enough to be a threat.

    The fixed number of coins things is like the gold standard no? Without a centralised government / bank to control supply you need some kind of enforced scarcity otherwise the currency would become essentially worthless. Again, the metaphor the really seem to be pushing is gold, and the mining thereof.

  13. #13
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    "Well that's sort of my point. There's a Totnes alternative currency as well I believe, and the government is clamping down on these things because they are basically no big deal. I suspect bitcoin will also remain not a big deal and therefore be fine. I'm not doubting that they would take action if it actually became large enough to be a threat."
    Well, by that argument - if it succeeds it will fail and.... if it fails it will also fail. Hmmm.

    "The fixed number of coins things is like the gold standard no? Without a centralised government / bank to control supply you need some kind of enforced scarcity otherwise the currency would become essentially worthless. Again, the metaphor the really seem to be pushing is gold, and the mining thereof."
    I suppose but with gold there wasn't a fixed and finite limit and a date set for when it would all run out. A scarcity and a mathematically determined limit don't seem to be the same to me.

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    That depends on what you mean by fail. If it becomes popular enough to warrant banning, then I think it should be able to carry on quite merrily afterwards. Past attempts to kill off P2P exchange of data representing illegal things haven't exactly been a blinding success have they? There's a possibility that such a move would massive increase their popularity via the publicity. Would depend on exactly how hard they came down on it. Unlike bit torrent there aren't any centralised trackers to go after so they'd have to pursue everyone individually.

    I'm not sure about the limit thing. Ultimately, there is a fixed limit to the amount of gold in the world, so it also has a finite limit. The only difference is that we are more likely to actually get to the end of the bitcoins than we are the gold. Are there any resources that have basically run out? I'm not sure. Oil's on it's way I suppose. Thing is, I'm not sure if the limit is there for some cunning economic reason or if it's just required to make the maths work.

    I'll download a miner tonight and get some, for the purposes of research and that.

  15. #15
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    Actually the bitcoin site has a page explaining why (they think) the deflation caused by the every increasing difficulty of generation them isn't going to be a problem.
    https://en.bitcoin.it/wiki/Deflationary_spiral

    "Elaborate controls to make sure that currency is not produced in greater numbers is not something any other currency, like the dollar or the euro, has," says Russ Roberts, professor of economics at George Mason University. The consequence will likely be slow and steady deflation, as the growth in circulating bitcoins declines and their value rises. "That is considered very destructive in today's economies, mostly because when it occurs, it is unexpected," says Roberts. But he thinks that won't apply in an economy where deflation is expected. "In a Bitcoin world, everyone would anticipate that, and they know what they got paid would buy more then than it would now."

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